International standard-setters on Monday called for tougher rules on safeguarding crypto clients’ assets and avoiding conflicts of interest, after multiple allegations of bad behavior emerged during crypto’s recent turbulent year.

The Financial Stability Board (FSB), which groups regulators from some two dozen jurisdictions, including the U.S., EU, China and the U.K., published recommendations to ensure “consistent and comprehensive” regulation of the sector. The recommendations build on proposals originally floated in October and are focused on preventing the kind of behavior alleged to have been carried out by companies such as FTX and Celsius.

“The events of the past year have highlighted the intrinsic volatility and structural vulnerabilities of crypto-assets and related players,” said the document, unveiling new norms which could see major crypto conglomerates forced to separate some of their activities and functions.

FTX, which filed for bankruptcy in November, has been hit by a wave of allegations of poor record-keeping and misuse of customer funds. Meanwhile, Celsius co-founder and ex-CEO Alex Mashinsky was arrested in New York on Thursday and has pleaded not guilty to multiple charges that he misled investors and manipulated token prices for personal gain.

In setting out the rationale for tougher global rules, the FSB also referred to the recent collapse of crypto-focused banks, the brief de-pegging of Circle’s USDC stablecoin two months ago and the sudden downfall of the terraUSD stablecoin in May 2022 that heralded a new crypto winter.

Different global approaches

Major global players are taking different approaches to how to regulate crypto. While the European Union has crafted a new tailored law known as the Markets in Crypto Assets (MiCA) regulation, the U.S. Securities and Exchange Commission (SEC) is seeking to argue it can apply existing hundred-year-old rules originally designed for traditional financial instruments.

In theory, the principles from the FSB should be flexible enough to allow both approaches, but officials are keen to stress continuity.

“This global framework does not rewrite or create a completely new regulatory rulebook for crypto assets,” FSB Secretary General John Schindler told reporters. “Crypto asset activities are not as different from traditional financial activities as some would have us believe, and similar rules should apply.”

“While jurisdictions work to implement these standards, we would encourage all crypto-asset players to start to comply with these basic expectations and standards now,” he added.

The final recommendations follow a consultation in which traditional finance companies pushed for stronger crypto controls, while the likes of Binance and Coinbase have warned that tougher rules could constrain innovation.