Data privacy is among the main legal challenges to cross-border cooperation in regulating cryptocurrencies such as 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 how governments around the world have regulated the cryptocurrency market.
“This inconsistency creates challenges such as regulatory arbitrage, data gaps, and market fragmentation,” the FSB write In a 107-page peer review report released Thursday.
Among the main issues in cross-border cooperation, the regulator highlighted divided supervisory responsibilities among multiple authorities in each jurisdiction, different approaches and, in particular, privacy laws.
The FSB wants the privacy barrier discussed
The issue of data confidentiality is often a concern in identifying potential systemic risks and thus efficiently overseeing cross-border crypto asset activities, according to the FSB.
“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 issue is that some players are hesitant to share sensitive information due to fears about confidentiality violations or the lack of guaranteed rewards.
“These concerns have led to delays in responding to cooperation requests where they have been made and, in some cases, may prohibit or discourage participation in cooperation arrangements,” the FSB wrote, adding:
“Addressing these challenges is likely to promote more effective and efficient cross-border collaboration in the rapidly evolving asset management landscape.”
With the authority seeing data privacy as a major blind spot in the implementation of effective global crypto regulation, it remains to be seen what solutions it can propose.
Data providers lack accuracy and consistency
While the FSB has highlighted data privacy as a key challenge in addressing risks to financial stability, the crypto community has long sought protect it as a basic human right. This does not make crypto transactions completely unreliable, but the FSB stresses 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 incomplete or fragmented data sources,” the FSB wrote.
Related: Centralized exchanges face claims of massive undercounts
Count The FSB has flagged similar data allocation 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 challenges but did not receive a response prior to publication.
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