Failure of Multi-Function Crypto Firms a Limited Threat to 'Real Economy': FSB

A new report by the Financial Stability Board said further assessments of possible implications are required because "significant information gaps remain."

AccessTimeIconNov 28, 2023 at 10:55 a.m. UTC
Updated Jan 26, 2024 at 3:10 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The collapse of crypto firms that engage in multiple activities isn't a big threat to "the real economy," according to a report by the Financial Stability Board (FSB) published Tuesday.

The report by the international standard-setter also said that further assessments are required because "significant information gaps remain."

The FSB, which monitors financial systems and proposes rules to help prevent financial crises, said it was assessing the financial stability implications of multifunction crypto-asset intermediaries (MCIs) in July. MCIs are individual firms or groups of affiliated firms that combine a broad range of services, products and functions typically centered around the operation of a trading platform, according to the FSB. This could apply to numerous crypto heavyweights, like Coinbase or Binance.

The FSB warns that crypto firms combining different activities are more vulnerable to failure and that mitigating the impact of such a failure depends on how well global crypto regulation is implemented. The report also identified "information gaps" that require enhanced cross-border cooperation and information sharing.

The report found that the vulnerabilities of MCIs and firms in traditional finance are not very different. However, vulnerabilities increase when MCIs engage in proprietary trading, market-making on their own trading venues, and lending and borrowing.

The FSB said there is a need to assess whether disclosures and reporting requirements of MCIs are adequately covered or would warrant additional measures.

"Combining functions in MCIs that are typically restricted or separated for traditional finance appears prima facie inconsistent with the principle of ‘same activity, same risk, same regulation’," the report said.

Edited by Sandali Handagama.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Amitoj Singh

Amitoj Singh is a CoinDesk reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.