The G20's Financial Stability Board (FSB) has cautioned that differing privacy laws are creating obstacles to unified cross-border regulation of cryptocurrencies. The FSB, a global financial authority, has identified inconsistencies in how various governments regulate the cryptocurrency market, which could harm global financial stability.
In a peer review report released on Thursday, the FSB highlighted that the fragmented implementation and coordination of crypto regulations across jurisdictions remains insufficient to address the global nature of crypto-asset markets. This patchwork of regulations creates opportunities for regulatory arbitrage, data gaps, and market fragmentation. John Schindler, FSB Secretary General, stated that regulators must share information and coordinate their actions to prevent the global market from becoming vulnerable to financial risk, and to prevent regulatory evasion.
One of the key challenges identified by the FSB is the issue of data confidentiality, which is often a concern when identifying potential systemic risks and supervising cross-border crypto asset activities. Secrecy or data privacy laws in some jurisdictions restrict the ability of local firms to share data with regulators in other jurisdictions. The FSB noted that some players are hesitant to share sensitive information due to fears about confidentiality breaches or a lack of guaranteed reciprocity. These concerns can lead to delays or discourage participation in cooperation arrangements altogether.
The FSB believes that addressing these challenges is likely to foster more effective and efficient cross-border cooperation in the rapidly evolving crypto-asset landscape. The organization sees data privacy as a key blind spot in enforcing effective global crypto regulation.
The FSB's warning comes amid a surge in the value of the crypto market, which has doubled to $4 trillion over the last year, partly fueled by a pro-crypto stance from U.S. President Donald Trump. This rapid growth, coupled with increasing integration of crypto into traditional financial systems and the wider use of stablecoins, heightens the urgency for coherent global oversight. The FSB's report noted that few countries have complete regulatory frameworks for stablecoins, which could become a key vulnerability if they gain broader adoption in cross-border transactions.
The FSB has issued eight recommendations to help countries build stronger and more consistent rules for crypto assets. These recommendations include faster enactment of clear laws defining stablecoins, outlining who can issue them, and detailing how their reserves should be held and verified. The agency emphasized that the benefits of innovation and growth in digital finance can only last if there is confidence, which depends on strong rules that protect users and prevent abuse.
The report also calls for improved data capabilities and infrastructure to monitor financial stability risks within the crypto-asset market and between the crypto-asset market and traditional financial markets. It urges the pursuit of bilateral and multilateral arrangements to ensure cross-sectoral and cross-border cooperation.
The European Union's Markets in Crypto-Assets (MiCA) framework, which came into full effect in late 2024, introduces clear categories for tokens, stablecoins, and service providers. While some jurisdictions like Singapore and Switzerland offer clarity and sandbox testing, others are catching up or cracking down. The regulatory progress is global but uneven, forcing companies to adapt across borders.
The FSB's findings highlight the urgent need for international cooperation and consistent implementation of crypto regulations to minimize risks, prevent regulatory arbitrage, and improve oversight of the global crypto-asset market.
