TechFlow, October 16 — According to Decrypt, a recent report from the Financial Stability Board (FSB) warns that fragmented global cryptocurrency regulation is creating significant financial stability risks. After reviewing nearly 40 jurisdictions, the FSB found that crypto firms are engaging in "regulatory arbitrage," establishing operations in lenient regions and then expanding globally to circumvent stricter oversight. The European Banking Authority has also confirmed that crypto companies are engaging in "forum shopping" to evade new regulations such as MiCA.
John Schindler, Secretary-General of the FSB, stated that divergent rules could amplify market shocks. The report notes that reserves held by stablecoin issuers are now comparable in size to those of large money market funds, and a rapid liquidation could trigger market turmoil. As major financial institutions increase their exposure to crypto assets, cross-border regulatory cooperation remains "fragmented, inconsistent, and insufficient." The FSB has put forward eight recommendations urging countries to strengthen regulatory collaboration.
