FSB warns that inconsistencies in crypto regulation could trigger a chain failure risk

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

After reviewing nearly 40 jurisdictions, the FSB found that crypto firms are expanding globally by establishing operations in loose regulatory environments through "regulatory arbitrage," thereby evading strict regulations. The European Banking Authority also confirmed that crypto companies are engaging in "forum shopping" to circumvent new regulations like MiCA. FSB Secretary General John Schindler stated that differing rules could amplify market shocks. The report noted that reserves held by stablecoin issuers have become comparable to large money market funds, and a rapid liquidation could lead to market turmoil. As large financial institutions increase their exposure to crypto assets, cross-border regulatory cooperation remains "fragmented, inconsistent, and insufficient." The FSB has proposed eight recommendations urging countries to strengthen regulatory cooperation.