FSB outlines priority areas including non-bank financial intermediation, climate change, and cross-border payments, focusing on asset tokenization and AI implications. G20 endorsed a global regulatory framework for crypto-assets.
Addressing the ongoing complexities surrounding global financial stability, Klaas Knot, the chair of the Financial Stability Board (FSB), conveyed concerns to the G20's finance ministers and central bank leaders through a letter. In preparation for their gathering in São Paulo on February 28 and 29, the FSB has outlined its strategic focus areas, including the tokenization of assets.
In the letter, which was penned on February 20 and made public on February 26, Knot highlighted key focus areas for the FSB such as the role of non-banking financial entities, the impact of climate change, enhancements in cross-border payments, and the advancement of digital innovation. Specifically, Knot mentioned, "In 2024 we will deliver reports on the financial stability implications of the tokenisation of assets and of AI," as a part of its commitment to understanding the potential and challenges of cryptocurrencies.
Last year, G20 officials gave their nod to a comprehensive regulatory and supervisory framework for managing crypto-assets. This endorsement led to the adoption of the G20 Roadmap on Crypto Assets in October, which was a direct outcome of the New Delhi Leaders' Declaration from July. A collaborative effort between the FSB and the International Monetary Fund resulted in a Synthesis Paper proposing this roadmap.
A progress update on the roadmap's deployment is expected from the FSB in October. Moreover, the organization is looking to introduce a system for incident report sharing. This initiative aims to facilitate simultaneous information sharing about incidents across a broad network of financial institutions and agencies. The letter elaborates:
“Accelerating digitalisation across all parts of finance has improved efficiencies but also increased the interconnectedness of the global financial system.”
This digital integration heightens the risk of a single institution's cyber or operational mishap having wider repercussions, affecting various countries and market segments.
Proposals for international frameworks for information exchange have been made, including the G20’s Crypto-Asset Reporting Framework designed for tax authorities, unveiled in October.
In its efforts to enhance cross-border payments, the FSB intends to focus on Anti-Money Laundering (AML) and Know Your Customer (KYC) practices.
A message from FSB Chair @KlaasKnot to the finance ministers and central bank governors of #G20Brazil has outlined the board's strategic initiatives during Brazil's G20 presidency. https://t.co/hipdBI4ouy #FinancialStability #NonBanks #cryptoassets #ClimateChange #CrossBorderPayments pic.twitter.com/qGYxOSpbDT
The G20 consortium, which includes 19 countries, the European Union, and the African Union, sees Brazil at the helm this year, taking over from India. India was pivotal in pushing for a unified approach to cryptocurrency regulation. The G20 baton will be passed to South Africa in 2025.
Operating under the aegis of the Bank for International Settlements, the FSB operates as an autonomous entity aiming to foster global cooperation and information exchange among financial regulatory bodies.