The Financial Stability Board (FSB), the G20 regulator, warns that privacy legislation is one of the biggest obstacles to international cooperation on crypto regulation. In a new report, the organization states that the differences between countries seriously complicate the approach to risks in the crypto market.
The FSB, which is funded by the Bank for International Settlements (BIS), published a 107-page report stating that governments worldwide still do not have a clear policy. According to the FSB, this inconsistency leads to data gaps, market fragmentation and regulatory arbitrage ā situations in which companies consciously seek out countries with the loosest rules.
Privacy legislation hinders international cooperation
A large part of the problems revolves around the strict privacy rules in many countries. These laws limit the ability to share data about crypto transactions with foreign regulators. This makes it difficult for authorities to cooperate in detecting financial risks that cross national borders.
Some countries even explicitly prohibit companies from sharing data with other jurisdictions. In addition, many parties are reluctant to release sensitive information for fear of a breach of confidentiality or because there is no guarantee that other countries will offer the same openness. According to the FSB, this leads to delays or even the complete failure of international cooperation.
Inadequate data makes supervision of the crypto market difficult
The FSB emphasizes that effective cooperation is essential to oversee the fast-growing crypto market. Without complete and reliable data, regulators have difficulty assessing the risks that certain crypto activities pose to financial stability.
The organization points out that much data currently comes from commercial data suppliers and surveys. These sources are often incomplete or inconsistent, which limits the quality of supervision. The FSB warns that these data problems have been known for years, but little progress has been made.
The crypto community sees privacy as a right
It is striking that while regulators see data protection as an obstacle, many players within the crypto world actually view privacy as a fundamental human right. For them, privacy is not a threat, but an essential part of financial freedom and security.
This contradiction makes it difficult to find a balance between transparency and privacy protection. The FSB emphasizes that it is precisely this balance that is critical to developing a globally functioning regulatory framework for digital assets.
Little progress since earlier warnings
The FSB warned about the same problems surrounding data quality and cooperation almost four years ago. Yet hardly any improvements have been made since then, while the crypto market has grown explosively. The regulator fears that this backlog could undermine global financial stability.
The FSB therefore calls on countries to remove legal obstacles and cooperate more in the supervision of crypto transactions. Only through clear rules and international cooperation can supervision of the crypto sector become effective and future-proof.
Source: https://newsbit.nl/fsb-waarschuwt-privacyregels-belemmeren-wereldwijde-aanpak-van-cryptoregulering/
