Crypto Asset Intermediaries

Crypto Asset Intermediaries

News: Financial Stability Board (FSB)’s latest report on crypto-asset intermediaries sought measures to enhance cross-border cooperation and information sharing among local authorities.

About:
• Multi-function crypto-asset intermediaries (MCIs) as firms providing various crypto services, such as trading, posing risks due to a lack of controls, transparency, and potential conflicts of interest.
• In traditional finance, separate entities handle these functions, preventing conflicts and promoting integrity.

Key highlights:
• MCIs earn from transaction fees, blockchain infrastructure operations, proprietary trading, and diversified services. Limited publicly disclosed information makes assessing revenue sources challenging.
• MCIs lack transparency about their corporate structure and are privately held. Poorly separated business lines and limited disclosure raise concerns about their vulnerabilities and governance.
• The report notes that poor risk management may facilitate insider misconduct and inflate prices of selfissued crypto assets. Lack of transparency hides risks until negative shocks materialize.
• Market dominance by one or more MCIs may distort crypto-asset prices and facilitate anti-competitive behavior. Concentration risk raises barriers, increases costs for users, and amplifies vulnerabilities.
• The threat to global financial stability from MCI failure is presently limited but recent events highlight vulnerabilities.
• The failure of crypto-friendly banks post-FTX collapse led to significant losses and shook confidence in crypto markets.

Conclusion
• The FSB report underscores the need for improved regulation and transparency in the crypto space, emphasizing the potential risks associated with MCIs.
• It points to the challenges in assessing their revenue, managing concentration risks, and the spillover effects on the broader financial system.