A new report by the Financial Stability Board (FSB) highlights several key factors hindering cross-border co-operation among countries regarding cryptocurrencies. The G20 risk watchdog identified the difference in privacy rules as one such key hurdle.
It has been 16 years since Bitcoin’s (BTC) launch, and financial watchdogs around the world continue to face problems when trying to access crypto data. According to a recent report by the FSB, privacy laws are complicating efforts to access such data.
In a detailed 107-page long peer reviewed report, the G20 risk regulator remarked that privacy of data remains a crucial bottleneck that is hindering cross-border cooperation in regulating digital assets such as Bitcoin (BTC), Ethereum (ETH), and stablecoins.
The FSB has found several major gaps in how governments of different countries around the world regulate the digital assets market. The authority said that these gaps lead to second-order challenges, including regulatory arbitrage, data gaps, and market fragmentation. It added:
Comprehensive coverage of potentially higher risk activities, such as borrowing, lending, and margin trading, is often lacking. In addition, gaps or the lack of comprehensive reporting frameworks for crypto-asset service providers (CASPs) hinder authorities’ ability to monitor and address potential financial stability risks effectively.
The FSB noted that crypto supervision and enforcement efforts tend to lag behind regulatory development, with many jurisdictions yet to implement the tools necessary for ensuring compliance and oversight.
According to the FSB, the issue of data confidentiality remains a major concern in identifying potential systemic risks and, in turn, supervising cross-border crypto asset activities. Specifically, secrecy or data privacy laws are likely to pose significant barriers to co-operation.
Further, the FSB remarked that a good chunk of users are reluctant to share confidential information due to risks of data breaches and the lack of guaranteed reciprocity. The report shares the following table highlighting the implementation status of the FSB’s policy recommendations.
