Home Archive G20 Watchdog Develops ‘Vigilant’ Cryptocurrency Monitoring Framework

G20 Watchdog Develops ‘Vigilant’ Cryptocurrency Monitoring Framework

Samburaj Das
Last Updated March 4, 2021 4:03 PM

The Financial Stability Board (FSB), an international body tasked to monitor the global financial system while coordinating regulation for G20 nations, has published a new framework for monitoring cryptocurrency assets.

With an announcement  on Monday, the FSB published its report and revealed its standardized framework delivered to G20 finance ministers and central bank governors ahead of their meeting in Buenos Aries on July 21-22.

The framework, developed in coordination with the Committee on Payments and Market Infrastructures (CPMI) – a committee comprising of the governors of the central banks of G10 nations – presents a number of metrics that the FSB ‘will use to monitor crypto-asset markets’, the report said.

An excerpt from the framework [PDF ], explains:

“The objective of the framework is to identify any emerging financial stability concerns in a timely manner. To this end, it includes risk metrics that are most likely to highlight suck risks, using data from public sources where available.”

Primary risk metrics include the market cap (both size and rate of growth), price levels and volatility of major cryptocurrencies.

ICO issuance and capital inflows and outflows from fiat currencies will be considered as wealth effect metrics while institutional metrics will also be analyzed to keep an eye on trading volumes, margining and interest among traditional financial markets.

The framework, the FSB adds, “should help to identify and mitigate risks to consumer and investor protection, market integrity, and potentially to financial stability.’

The FSB’s proposed metrics includes keeping an eye on the value and growth of cryptocurrencies like bitcoin and ethereum.

Chaired by Bank of England governor Mark Carney, the FSB added:

“While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time, it recognises the need for vigilant monitoring in light of the speed of market developments.”

The sweeping regulatory initiative sees other international regulatory bodies also undertaking ‘substantial work’ with their own crypto-related mandates.

As an example, the International Organization of Securities Commissions (IOSCO) has now established an ICO (initial coin offering) Consultation Network to discuss possibilities and concerns surrounding the radical new form of fundraising powered by cryptocurrencies. Further, the body is also developing a ‘Support Framework’ to aid international member bodies to better understand the impact of domestic and international ICOs on local investors.

Another notable endeavor sees the Basel Committee on Banking Supervision (BCBS), a banking committee established by G10 central bank governors, study banks’ direct and indirect exposure to cryptocurrencies while possibly outlining their treatment of crypto-assets.

The Financial Action Task Force (FATF), is also set to submit a separate report on money laundering and terrorist financing risks related to cryptocurrencies to G20 members.

Todays’ published report follows a July deadline call for preliminary regulatory recommendations by G20 nations during the summit meeting earlier in March this year. In an initial letter to G20 finance ministers and central bank governors at the time, FSB chair Mark Carney claimed crypto-assets do not represent a threat to the global financial system. He added that the initial assessment could change in time if cryptocurrencies gained usage as payment instruments in societies.

Featured image from Flickr/Bank of England .