ABA Letter to FSB on Cryptoasset Guidance

Financial Stability Board
Secretariat to the Financial Stability Board
Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel
Switzerland

Colleagues:

The American Bankers Association (ABA) welcomes the opportunity to respond to the proposed framework for the international regulation of crypto-asset activities (Framework) issued by the Financial Stability Board (FSB) on October 11, 2022. The Framework covers the recommendations issued in two FSB consultative reports: (1) Regulation, Supervision and Oversight of Crypto-Asset Activities and Markets (CA Recommendations); and (2) Review of the FSB High-level Recommendations of the Regulation, Supervision and Oversight of "Global Stablecoin" Arrangements (GSC Recommendations).

Overall, we support both the CA Recommendations and the GSC Recommendations. In our view, they provide a useful, principles-based approach to guide the international community in applying existing market and prudential regulation to a novel category of financial activity, and in filling gaps by developing new standards and guidance, as necessary.

The crypto-asset marketplace is changing rapidly. Just over a year ago, in November 2021, the total market capitalization of all cryptocurrencies (including stablecoins) peaked at around US$3 trillion. Since then, in the face of several high-profile events, the crypto-asset market has precipitously collapsed in value (total market cap is ~US$855 billion as of December 13, 2022), and many consumers and investors have been adversely impacted. These events highlight the risk that the largely unregulated markets and entities that dominate this space today pose to investors and financial stability and further emphasize the value of a coordinated international framework for regulating crypto-asset activities.

Blockchain technology has potential for application in financial services that, over time, may lead to enhanced efficiencies, new products, and new ways to deliver traditional products. The fundamental characteristics of blockchain, including immutability and transparency, are relevant and valued in the financial services market, and many banks are exploring potential uses, including through tokenized deposits and recordkeeping. Importantly, the use of distributed ledger technology (DLT) for traditional banking activities, such as tokenized deposits, or for infrastructure does not constitute crypto-asset activity, and should not trigger additional regulation.

With that backdrop, we appreciate the FSB’s continued, thoughtful approach to developing recommendations covering both general crypto-asset and global stablecoin regulation. Below we respond directly to several matters raised in the Framework.

Download the letter to read the full text.