Financial Stability Board: Encrypted trading platforms may lead to risk concentration, conflict of interest and misuse of customer assets

The Financial Stability Board (FSB), which coordinates multinational financial regulation and sets and enforces global financial standards, held a plenary meeting in Basel, and one of the topics of the meeting was the collapse of crypto assets and the FTX cryptocurrency exchange. The FSB noted that, so far, financial stability risks from turmoil in cryptoasset markets have remained limited, but the growing linkages between cryptoasset firms and core financial markets and institutions has increased the risk of spillovers. Crypto trading platforms combine multiple activities that are often separated in traditional finance, potentially leading to concentrations of risk, conflicts of interest, and misuse of client assets. Members emphasized the importance of addressing these issues. The plenary session emphasized the importance of continued vigilance and the urgency for the FSB and standards-setting bodies to move forward with their policy work program to establish a global regulatory framework, including in non-FSB member jurisdictions.