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Financial Stability Watchdogs Vow to Tackle DeFi, Learn FTX Lessons
Policymakers from the world’s major jurisdictions want an international rulebook for crypto.
Updated Dec 6, 2022, 3:59 p.m. Published Dec 6, 2022, 3:15 p.m.
Financial policy makers from across the globe vowed Tuesday to take a closer look at the risks of decentralized finance (DeFi) as they rake over the coals of collapsed Bahamas-based crypto exchange FTX.
Members of the Financial Stability Board underlined the urgency of having a global framework for regulating and supervising crypto, as set out in an October consultation. They said the FSB would look closer at “DeFi-specific vulnerability indicators,” examining the interlinkages of a sector that is fast-growing and can replicate traditional activities like lending, but which is hard to regulate using traditional tools.
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“Crypto trading platforms, combining multiple activities that are normally separated in traditional finance, can lead to concentrations of risk, conflicts of interest, and a misuse of client assets,” the FSB said, noting it had drawn “preliminary lessons from the recent failure of FTX.”
The Financial Stability Board includes central bankers, financial regulators and finance ministry officials from 24 jurisdictions including the U.S., U.K. and European Union, and its standards have been influential for regulating the traditional finance sector since 2008.
Read more: ‘Comprehensive’ International Crypto Rules Proposed by Influential Finance Watchdog
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