Taking a nuanced approach to digital asset regulation
The Foundation views on the Financial Stability Board’s public consultation on stablecoins and crypto-asset activities
The Cardano Foundation has long held that an adequate, risk-based legal and regulatory framework is necessary to realizing the potential of digital assets and blockchain technology. When built on sensible and suitable principles, appropriate rules can aid in boosting the adoption of distributed ledger technology and expand its real life use cases. The Foundation, therefore, strives to constructively contribute to the global conversation around the development of digital assets and blockchain regulation. For this, we often engage with global and national policy makers, as well as with regulators and standard setting bodies, sharing our expertise and highlighting the benefits of an innovation-friendly approach to blockchain regulation.
Over the course of 2022, the Cardano Foundation actively contributed to policy discussions across the world. One notable contribution came in December 2022 with the submission of a response to a public consultation conducted by the Financial Stability Board (FSB), an important international body that monitors and makes recommendations about the global financial system and its regulation. The consultation invited comments on the FSB’s proposed regulatory framework and recommendations for stablecoins, and on crypto-asset activities and markets. The Cardano Foundation’s submission, along with all other responses to the consultation, is published on the FSB’s website.
In the consulting documents, the FSB assesses potential risks of crypto-assets and respective activities, and outlines high-level principles to address them. These proposed recommendations aim to provide guidance and establish general standards for national policy makers and regulators. As such, whether directly or indirectly, they may have a decisive influence in shaping the regulatory and legal framework concerning digital assets and blockchain. Similarly, they might affect how respective rules will be applied.
With this public consultation, the FSB reached out to the blockchain industry and the crypto ecosystem in order to solicit feedback. The FSB intends to incorporate the public comments and finalize its recommendations by July 2023.
The Cardano Foundation’s submission reflects our belief that good regulatory policy, which is innovation-friendly while also accurately mitigating potential risks, should consider the broad range of potential applications of blockchain technology. We emphasize that blockchain should not be reduced to use cases revolving around financial or finance-like activities, and call for a more nuanced approach, recognizing the need for relevant differentiations. Furthermore, it seems crucial to differentiate between activities that concern the blockchain technology as an infrastructure technology versus activities that build and implement use cases and business models on top of the technology layer. While the FSB’s recommendations cover many potential risks arising from use cases sufficiently similar to traditional financial activities, we believe it to be crucial to avoid painting with too broad a brush. A measured approach that contemplates the multiple aspects of blockchain use cases, can avert creating a basis for overreaching or inadequate regulation, ultimately hampering growth and innovation.
The Cardano Foundation looks forward to continued engagement with the FSB and other global standard-setters. We hope to contribute to an open, sound, and innovation-friendly global regulatory framework for blockchain technology.