The Financial Stability Board said May 31 that crypto-assets "do not pose material risks to global financial stability at present" but they raise policy issues beyond financial stability and "vigilant monitoring" of the nascent asset is necessary.
The FSB highlighted in the report — which will be sent to G20 finance ministers for their June meeting in Japan — the potential for regulatory gaps in cases where crypto-assets do not fall under the purview of market regulators and payment system oversight since such assets have been "designed to function outside established regulatory frameworks."
The FSB believes that a lack of international standards or recommendations can give rise to gaps as well. Due to the rapidly evolving nature of the crypto-asset ecosystem, it is difficult to assess how these potential gaps can affect overall financial stability. Thus, the FSB believes it is prudent to take a forward-looking approach for monitoring these assets because it would help provide a foundation for identifying potential gaps and which areas need to be prioritized.
The forward-looking assessments could include information on financial institutions' exposure to crypto-assets of both bank and non-bank entities. However, it should be based on information available publicly as much as possible.
The FSB said that authorities will have to consider the differences in legal frameworks across jurisdictions and the "fast-moving state" of the technology when determining their response, but that "multilateral action" is necessary for a coherent response.
There is no consensus among FSB members on whether international organizations, which have been working to address the issues arising in the nascent industry, need to coordinate more for an appropriate multilateral response.
Some FSB members are of the mind that current policy tools are enough to address the majority of issues around crypto-assets, some think the policy implications around these assets do not always fall into existing remits which could lead to "regulatory asymmetries."
The FSB, which was formed by the G20 countries in 2009 after the financial crisis, advised the group to discuss the topic of regulatory approach and potential gaps as well as whether higher levels of coordination is necessary.