FSB warns that inconsistent crypto regulation may trigger contagion risk

ChainCatcher news, the latest report from the Financial Stability Board (FSB) warns that the fragmentation of global cryptocurrency regulation is triggering serious financial stability risks.

After reviewing nearly 40 jurisdictions, the FSB found that crypto companies are engaging in "regulatory arbitrage" by establishing operations in more lenient regions and then expanding globally to evade stricter regulations. The European Banking Authority also confirmed that crypto companies are engaging in "forum shopping" in an attempt to circumvent new regulations such as MiCA. FSB Secretary General John Schindler stated that differing rules could amplify market shocks. The report points out that the reserves held by stablecoin issuers are now comparable to those of large money market funds, and a rapid liquidation could cause market turmoil. As major financial institutions increase their exposure to crypto assets, cross-border regulatory cooperation remains "fragmented, inconsistent, and insufficient." The FSB has put forward eight recommendations urging countries to strengthen regulatory cooperation.