The Financial Stability Board (FSB), the regulatory watchdog of the G20 countries, on July 17, 2023, issued final recommendations to ensure consistent and comprehensive regulation in the cryptocurrency asset sector, according to a Reuters report.
After the recent turbulent year for cryptocurrencies and the collapse of FTX, a cryptocurrency exchange, in November 2022, the importance of comprehensive global regulatory guidance became increasingly necessary. This is more because the adoption of cryptocurrencies is growing by the day.
Why did the need for regulations arise?
One of the main concerns raised by the FSB was curbing another global financial contagion risk. As the FSB stated in the Reuters article, recent events have shown that the risk of further spillover effects from crypto-asset markets on the larger financial system could increase if its ties to traditional banking deepen.
As the cryptocurrency market expands, so does the need to embrace fundamental principles inspired by conventional finance, before the sector poses enough risk to jeopardize financial stability. This involves implementing strong governance to avoid conflicts of interest, practicing strong risk management, and ensuring transparent disclosures to safeguard client funds separately from company assets.
Diverse regulatory landscapes
According to CoinDesk, different regulatory bodies are implementing different approaches to address vulnerabilities and uncertainty in the cryptocurrency market. The European Union has introduced a bespoke law called Markets in Crypto Assets, while the US SEC has explored applying centuries-old rules to traditional financial instruments.
The FSB principles call for flexibility to accommodate various approaches, emphasizing continuity. The Basel Committee and IOSCO, two international banking and securities watchdogs, will add more metrics to the FSB regulations to make them more comprehensive.
Mixed sentiments from the crypto industry on regulations
According to Forbes India, the FSB's comprehensive recommendations advocate for a uniform regulatory framework that includes crucial aspects such as the interconnection of crypto-asset markets, compliance with international standards, and supervisory approaches. Mainly, it focuses on three key areas: safeguarding client assets, managing conflicts of interest and strengthening cross-border cooperation.
While some industry players have criticized the regulatory watchdog's move, saying it misses the point of cryptocurrency working in a decentralized environment and that the regulations highlight only the point of view of governments, the broader market has welcomed the move.
The introduction of regulations aimed at financial risks in the crypto market marks a significant milestone in the search for a comprehensive and harmonized global regulatory framework that encourages responsible innovation.
This announcement has positive implications for investors as it offers transparency, risk management and strong governance in a previously unregulated sector. It allows them to navigate the crypto landscape with confidence and take advantage of opportunities while ensuring greater protection.
ETFs in focus
Investors looking to invest in the cryptocurrency market while managing risk effectively can check out the following ETFs. The ETFs listed below have performed well in the past month (as of July 19) and can help investors navigate the crypto market and minimize risk while maximizing exposure.
Valkyrie Bitcoin Miners ETF (GTMI) โ up to 52.64%
Blockchain ETFs and IShares Technology (IBLC) โ up to 34.13%
Bitwise Crypto Industry Innovative ETFs (bitq) โ up to 48.62%
Global Strategy X Blockchain and Bitcoin ETF (POINTS) โ up to 30.96%
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Bitwise Crypto Industry Innovators ETF (BITQ): ETF Research Reports
Global X Blockchain & Bitcoin Strategy ETF (BITS): ETF Research Reports
Valkyrie Bitcoin Miners ETF (WGMI): ETF Research Reports
iShares Blockchain and Tech ETF (IBLC): ETF Research Reports
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