{"id":51021,"date":"2023-11-28T17:29:18","date_gmt":"2023-11-28T17:29:18","guid":{"rendered":"https:\/\/prosfunds.com\/markets\/crypto\/additional-regulations-may-be-needed-to-prevent-another-ftx-style-catastrophe-fsb-report\/"},"modified":"2023-11-28T17:29:18","modified_gmt":"2023-11-28T17:29:18","slug":"additional-regulations-may-be-needed-to-prevent-another-ftx-style-catastrophe-fsb-report","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=51021","title":{"rendered":"Additional Regulations May be Needed to Prevent Another FTX Style Catastrophe, FSB Report"},"content":{"rendered":"
\n

Additional regulation may be needed to prevent another FTX-style collapse according to a new report from the Financial Stability Board (FSB) released Tuesday, November 28th.<\/p>\n

The report\u2019s goal<\/h2>\n

<\/span>
The international financial monitoring body\u2019s report particularly focuses on multifunction crypto-asset intermediaries (MCI), which they define as \u201cindividual firms, or groups of affiliated firms, that combine a broad range of crypto-asset services, products, and functions typically centered around the operation of a trading platform.\u201d\u00a0<\/p>\n

The goal of the study, in part, was to examine whether or not FSB recommendations went far enough to cover concerns regarding MCIs and whether additional policies may be warranted based on the results.<\/p>\n

Exacerbating vulnerabilities<\/h2>\n

<\/span>
\u201cMCI vulnerabilities are not very different from those of traditional finance, including leverage, liquidity mismatch, technology and operational vulnerabilities, and interconnections,\u201d the report reads. \u201cHowever, certain combinations of functions could exacerbate these vulnerabilities.\u201d<\/p>\n

The report used the crypto market crash and collapse of FTX in November 2022 as examples of MCI vulnerabilities, particularly when it comes to leverage and liquidity mismatch.\u00a0<\/p>\n

Disgraced FTX founder, Sam Bankman-Fried, who was found guilty on seven different fraud charges in Manhattan federal court last month, used over $8 billion of customer funds on various real estate purchases, political contributions, and more.<\/p>\n

Failure of a major MCI, like FTX, poses a \u201csignificant\u201d risk to the crypto-asset ecosystem due to their \u201ccentrality and interconnectedness,\u201d the FSB\u2019s report argues.<\/p>\n

When the crypto exchange ultimately collapsed, it had wide-reaching effects on the crypto market at large. BlockFi CEO, Zac Prince, testified that his company lost \u201ca little over a billion dollars\u201d consisting of both loans to and collateral on the exchange, ultimately forcing the digital asset lender into bankruptcy.\u00a0<\/p>\n

\u201cSignificant contagion effects\u201d<\/h2>\n

<\/span>
However, FSB\u2019s report notes that the potential total damage of these vulnerabilities \u201cdepends on the size of the linkages between the crypto-asset sector and the traditional financial system and whether such linkages are concentrated within systemically important financial institutions or multiple regionally significant financial institutions.\u201d<\/p>\n

\u201cThe collapse of a major MCI could have significant contagion effects for the crypto-asset ecosystem, but limited effects on the financial sector and the real economy,\u201d the report stated, citing a lack of connection between the cryptocurrency industry and \u201ccore\u201d financial markets.<\/p>\n

Furthermore, FSB\u2019s report notes that there are significant \u201cinformation gaps\u201d that hinder the report\u2019s assessment.<\/p>\n

\u201cMCIs typically do not provide accurate and complete public disclosures, unlike traditional firms, due to the lack of or non-compliance with regulatory reporting requirements,\u201d the report reads.<\/p>\n

The FSB suggested that additional reporting measures for MCIs may be needed to provide clear and fully adequate data, while further work is needed for \u201ccross-border collaboration\u201d to \u201ceffectively regulate\u201d MCIs altogether.<\/p>\n

\n
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Additional regulation may be needed to prevent another FTX-style collapse according to a new report from the Financial Stability Board (FSB) released Tuesday, November 28th. The report\u2019s goal The international financial monitoring body\u2019s report particularly focuses on multifunction crypto-asset intermediaries (MCI), which they define as \u201cindividual firms, or groups of affiliated firms, that combine a […]<\/p>\n","protected":false},"author":1,"featured_media":36381,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[35],"tags":[],"class_list":{"0":"post-51021","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-crypto"},"yoast_head":"\nAdditional Regulations May be Needed to Prevent Another FTX Style Catastrophe, FSB Report | Prosfunds<\/title>\n<meta name=\"description\" content=\"Additional regulation may be needed to prevent another FTX-style collapse according to a new report from the Financial Stability Board (FSB) released\" \/>\n<meta name=\"robots\" content=\"index, follow, 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