FSB warns that fragmentation of global cryptocurrency regulation is causing financial stability risks

The latest report of the Financial Stability Board (FSB) warns that the fragmentation of global cryptocurrency regulation is causing serious financial stability risks. The FSB reviewed nearly 40 jurisdictions and found that crypto companies have used "regulatory arbitrage" to set up operations in relaxed areas and then expand globally to avoid strict regulations. The European Banking Authority confirmed that crypto companies engage in "forum shopping" in an attempt to circumvent new regulations such as MiCA. FSB Secretary General John Schindler said different rules could amplify the impact on the market. The report pointed out that the reserves held by stablecoin issuers are already equivalent to those of large money market funds, and a rapid liquidation could cause market instability. As large financial institutions increase their exposure to crypto-assets, cross-border regulatory cooperation remains "fragmented, inconsistent and insufficient." The FSB has made eight recommendations urging countries to strengthen regulatory cooperation.