FSB to Collaborate with Standard-Setters to Regulate Decentralized Finance

02/16/2023 09:23 • NFT Newsflash • 162 views

It is reported that the Financial Stability Board (FSB) issued a report saying that it would work with other international standard-setters to determine how to regulate decentralized financial (DeFi) activities in different jurisdictions. According to the report, the FSB will also explore the extent to which it will strengthen its proposed policy recommendations in the field of encryption to address the specific risks of DeFi. In addition, it plans to work with other international standard-setters to explore how to fill the data gap in measuring and monitoring the interconnection between DeFi and traditional finance.

FSB: Global standard setters will work together to deal with DeFi regulation

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The popularity of the decentralized finance (DeFi) space has been growing rapidly in recent years, attracting the attention of regulators worldwide. The Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, has recently issued a report highlighting its intention to work with other international standard-setters to regulate DeFi activities in different jurisdictions.

The report suggests that the FSB will collaborate with standard-setters to strengthen its policy recommendations in the field of encryption to address specific risks associated with DeFi. The FSB recognizes that the unique features of DeFi, such as its decentralized and trustless nature, make it challenging to regulate using traditional methods. Therefore, the FSB is determined to explore innovative approaches to regulate DeFi activities while maintaining financial stability.

The FSB’s report also identifies the need to measure and monitor the interconnection between DeFi and traditional finance. This gap in data makes it difficult to assess any potential systemic risks that DeFi may pose to the broader financial system. The FSB aims to address this issue by working with standard-setters to explore how to fill the data gap.

The FSB’s approach of collaborating with other international standard-setting bodies to regulate DeFi is a positive development for the industry. The international cooperation of regulators is necessary to establish a framework that considers the peculiarities of DeFi while safeguarding financial stability. However, it is also essential to strike a balance between regulatory oversight and allowing DeFi to continue to innovate and grow. Striking such a balance will require a deep understanding of the technology and intentional efforts to avoid stifling innovation.

In conclusion, the FSB’s report highlights the need for a coordinated international approach to regulate DeFi activities effectively. The report’s emphasis on working with standard-setters to fill the data gap and to explore innovative approaches to regulation indicates a forward-looking attitude towards the industry. However, it remains to be seen how the FSB’s approach to regulating DeFi will evolve in the future, as there is still much to be done to strike a balance between regulation and innovation in the space.

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FSB to Collaborate with Standard-Setters to Regulate Decentralized Finance

FSB: Global standard setters will work together to deal with DeFi regulation

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