Privacy of data is among the key legal challenges to cross-border cooperation in regulating cryptocurrencies like Bitcoin and stablecoins, according to the G20’s risk watchdog.
The Financial Stability Board (FSB), a global financial authority funded by the Bank for International Settlements (BIS), has identified persistent gaps in how governments worldwide regulate the cryptocurrency market.
“This inconsistency creates challenges such as regulatory arbitrage, data gaps, and market fragmentation,” the FSB wrote in a 107-page peer review report released on Thursday.
Among the key issues in cross-border cooperation, the regulator highlighted divided supervisory responsibilities across multiple authorities in each jurisdiction, varying approaches and, notably, privacy laws.
FSB wants privacy barrier addressed
The issue of data confidentiality is often a concern in identifying potential systemic risks and thus efficiently supervising cross-border crypto asset activities, according to the FSB.
“Secrecy or data privacy laws may pose significant barriers to cooperation,” the regulator said in the report, adding that some jurisdictions restrict the ability of local companies to share data with regulators in other jurisdictions.
Another issue is that some players are hesitant to share sensitive information due to fears about confidentiality breaches or the lack of guaranteed reciprocity.
“These concerns lead to delays in addressing cooperation requests where they are made and, in some cases, may prohibit or discourage participation in cooperation arrangements altogether,” the FSB wrote, adding:
“Addressing these challenges is likely to foster more effective and efficient cross-border cooperation in the rapidly evolving crypto-asset landscape.”
With the authority seeing data privacy as a key blind spot in enforcing effective global crypto regulation, it remains to be seen what solutions it may propose.
Data providers lack accuracy and consistency
While the FSB highlights data privacy as a key challenge in addressing financial stability risks, the crypto community has long sought to protect it as a fundamental human right. This does not make crypto transactions completely untraceable, but the FSB stresses that crypto data providers often lack accuracy, consistency and comprehensiveness.
“Regulatory data sources remain limited, prompting authorities to rely heavily on commercial data providers, surveys, and other incomplete or fragmented data sources,” the FSB wrote.
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As the FSB flagged similar data provision issues nearly four years ago, it appears that little progress has been made in improving the quality of crypto data since then.
Cointelegraph contacted the FSB for comment on potential solutions to data challenges but had received no response before publication.
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