Cryptoassets regulators directory shows desire for global approach, says Barber

The Financial Stability Board (FSB) published the new directory late last week. It said its purpose is to “provide information on the relevant regulators and other authorities in FSB jurisdictions and international bodies who are dealing with cryptoasset issues, and the aspects covered by them”. The FSB will deliver the new directory to finance ministers and central bank governors from across the 'group of 20' (G20) major global economies at a meeting being held on 11 and 12 April.

The FSB, which monitors for, and makes recommendations to address, vulnerabilities affecting the global financial system, and which coordinates financial regulation across the G20, said last year that it did not believe cryptoassets pose “risks to global financial stability at this time”. It came to that view after considering the relatively small size of the market – estimated at the time of the FSB’s report to be worth less than 1% of global GDP – as well as the fact cryptoassets are currently no substitute for fiat currency, and have “very limited use for real economy and financial transactions”. This means, it said, that there is “limited” linkage between cryptoassets and “the rest of the financial system”.

However, the FSB said its view on the risk cryptoassets pose to financial stability could change if they become "significantly more widely used or interconnected with the core of the regulated financial system". Mark Carney, the then chair of the FSB and governor of the Bank of England, said at the time: “Wider use and greater interconnectedness could, if it occurred without material improvements in conduct, market integrity and cyber resilience, pose financial stability risks through confidence effects.” The FSB’s subsequently affirmed its views in an October 2018 report.

Andrew Barber of Pinsent Masons, the law firm behind Out-Law.com, said: “Whilst the FSB is content that cryptoassets currently do not present a stability risk, this directory forms part of its ongoing work to encourage international regulatory cooperation in this area. The nature of decentralised cryptoassets makes it difficult for national regulators to pursue their own stability objectives except by acting as part of a global body. The FSB may hope that this directory will facilitate dialogue before cryptoassets become more integrated into the global economy.”

A recent report by Pinsent Masons highlighted the regulatory developments impacting the cryptoasset market across the world over the past year. Pinsent Masons’ global analysis identified the points of convergence and divergence across jurisdictions in relation to the regulatory positions on cryptoassets.