On July 16 the Financial Stability Board (“FSB”) published a report establishing a framework to monitor-crypto-asset markets.  The report sets out the metrics that the FSB will use to monitor crypto-asset markets in order to identify any emerging financial stability concerns in a timely manner.

The FSB is an international body made up of national financial authorities, international financial institutions, and international standard-setting bodies, and monitors and makes recommendations about the global financial system.

The report notes that the FSB has performed extensive testing on distributed ledger technology, including outreach, monitoring, and analysis of payment innovations (although the FSB fails to mention which groups it consulted as part of its outreach efforts).  Importantly, the FSB concludes that crypto-assets do not currently pose a material risk to global financial stability, but acknowledges that vigilant monitoring is needed in light of the speed of tech developments and data gaps.

In terms of the monitoring framework, the FSB states that monitoring the size and rate of growth of crypto-asset markets is critical to understanding the potential size of wealth effects, should a decline in valuations occur.  The metrics highlighted in the report are: (i) closing price and market capitalization; (ii) price volatility; and (iii) monthly average of daily transactions.  The FSB also notes that the use of leverage and institutional exposure to crypto-asset markets are important metrics of transmission of crypto-asset risks to the broader financial system.

Other metrics, such as confidence effects, were not considered by the FSB at this stage due to the lack of qualitative market intelligence.  In addition, the FSB warns that many of the metrics used are based on public data, which varies in quality and is vulnerable to manipulation through improper practices such as wash trading, spoofing, and “pump and dump” schemes.

The report also outlines other analyses being undertaken by the Committee on Payments and Market Infrastructures (“CPMI”), International Organization of Securities Commissions (“IOSCO”), and the Basel Committee on Banking Supervision (“BCBS”)

The reported states that IOSCO has established an ICO Consultation Network for members to discuss their experiences and bring their concerns, including any cross-border issues, to the attention of fellow regulators.

Regarding crypto-asset platforms, the report outlines several regulatory risks, including that such platforms may be operating as exchanges without complying with relevant laws.  However, although the report finds that these platforms do not pose global financial stability risks, they do raise various significant risks, including concerns regarding consumer/investor protection, market stability, and money laundering and terrorist financing.  The report recommends that national authorities consider whether such platforms fall within the remit of securities regulators and take action to address risks.

With respect to bank exposure to crypto-assets, the report states that the BCBS has found it difficult to identify reliable data on banks’ holdings of crypto-assets and the prudential treatment of crypto-assets.  Further analysis is underway on both of these issues.

The report also includes some  controversial observations, namely the CPMI’s statement that first generation decentralized cryptocurrencies do not represent a claim or underlying asset, which makes for “unsafe money.”  Such an comment may be at odds with the broader fintech community which sees the lack of an underlying asset as a feature, not a failing.


Sue McLean is a partner in the IT/Commercial Practice Group in Baker McKenzie's London office. Sue advises clients on technology, sourcing and digital media business models and deals, as well as the legal issues relating to the implementation of new technologies. Sue advises clients (both customers and suppliers) on a wide range of technology matters including outsourcing, digital transformation, technology procurement, development and licensing, m/e-commerce, cloud computing, AI, FinTech, blockchain/DLT, social media, data privacy and cybersecurity. Sue also advises on commercial agreements and the commercial, technology and intellectual property aspects of M&A transactions and joint ventures. Sue has experience across various business sectors, including the financial services, consumer, TMT, travel and life sciences industries. She regularly speaks and writes about the impact of disruptive technologies and has a regular blog for Computerworld.


Patrick Dennien is an associate in the Firm’s Washington, DC office. He practices in white collar crime and corporate investigations, sanction systems of international organizations, money laundering risk and AML regulation, cryptocurrency risk and regulation, and corporate compliance programs. Prior to joining the Firm, Patrick worked for the World Bank’s anti-corruption arm, where he assessed the compliance programs of multinational companies, and advised on the development and implementation of effective compliance programs.