Regulation shopping risks 🛍️

The FSB has warned that crypto firms shopping around for lenient jurisdictions threatens market stability, risking "cascading failures."

Author

Stephen Graves
October 16, 2025

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📝 What you need to know

The Financial Stability Board has warned of the risks posed by a lack of consistency in crypto regulations across nearly 40 jurisdictions. Crypto firms are exploiting loopholes and performing “regulatory arbitrage,” the report’s authors argued, raising the risk of "cascading failures during market stress."

The FSB’s concerns echo those raised in a European Banking Authority report published Sunday, which revealed crypto firms engaging in “forum shopping” ahead of the roll-out of the Markets in Crypto Assets (MiCA) legislation.

FSB Warns of 'Cascading Failures' Due to Crypto Regulatory Arbitrage

The Financial Stability Board says fragmented rules enable crypto firms to shop around for lenient jurisdictions, threatening market stability.

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“Leverage risks can arise when CASPs provide services that allow users to borrow against their exposures, potentially leading to margin calls and cascading failures during market stress.”

A Financial Stability Board report flags the risks of crypto firms conducting “regulatory arbitrage.”

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