Data privacy is among the key legal challenges to cross-border cooperation in regulating cryptocurrencies like Bitcoin and stablecoins, according to the G20 risk watchdog.
The Financial Stability Board (FSB), a global financial authority funded by the Bank for International Settlements (BIS), has identified persistent gaps in the way governments around the world 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 Thursday.
Among key issues in cross-border cooperation, the regulator highlighted the distribution of supervisory responsibilities between multiple authorities in each jurisdiction, different approaches and, notably, privacy laws.
The FSB wants to remove obstacles to privacy
According to the FSB, the issue of data privacy is often a concern in identifying potential systemic risks and thus effectively supervising cross-border crypto asset activities.
“Secrecy or data privacy laws can 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 problem is that some actors are reluctant to share sensitive information for fear of confidentiality violations or lack of guaranteed reciprocity.
“These concerns lead to delays in processing requests for cooperation where they are made and, in some cases, may prohibit or completely discourage participation in cooperation agreements,” 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.”
While the authority sees data privacy as a major blind spot in enforcing effective global crypto regulation, it remains to be seen what solutions it might come up with.
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 points out that crypto data providers often lack accuracy, consistency and completeness.
“Regulatory data sources remain limited, prompting authorities to rely heavily on commercial data providers, surveys and other sources of incomplete or fragmented data,” the FSB writes.
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While the FSB reported similar data provision issues almost 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 the data issues but did not receive a response prior to publication.
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