The global financial stability outlook remains challenging, according to a letter from Klaas Knot, the chair of the Financial Stability Board (FSB), to G20 finance ministers and central bankers. However, the FSB has a plan in place, which it highlighted ahead of a meeting in São Paulo on Feb. 28 and 29. One of the key areas of focus will be asset tokenization.
In the letter, dated Feb. 20 and released on Feb. 26, the FSB outlined its priority areas, which include non-bank financial intermediation, climate change, cross-border payments, and digital innovation. Knot wrote that by 2024, the FSB will provide reports on the financial stability implications of the tokenization of assets and artificial intelligence (AI), demonstrating its commitment to addressing the impact of cryptocurrencies.
Last year, the G20 endorsed a global regulatory and supervisory framework for crypto-assets. The G20 Roadmap on Crypto Assets, based on the G20 New Delhi Leaders’ Declaration from July, was adopted in October. The FSB and the International Monetary Fund collaborated on a Synthesis Paper that proposed the roadmap.
The FSB has pledged to release a progress report on the implementation of the roadmap in October. It also plans to propose a format for incident reporting exchange, allowing multiple financial institutions and agencies to share information on incidents simultaneously. The letter emphasizes the potential for cyber or operational incidents at one financial institution to have spillover effects across borders and sectors.
Various international information exchange frameworks have been proposed, including the G20’s Crypto-Asset Reporting Framework for tax authorities, which was released in October.
As part of its work on cross-border payments, the FSB will address Anti-Money Laundering and Know Your Customer regulations.
The G20 consists of 19 countries, the European Union, and the African Union. Brazil has taken over the presidency of the G20 from India this year, with South Africa set to assume the leadership in 2025. India was the first G20 leader to highlight the need for global cryptocurrency regulation.
The FSB is an independent association “hosted” by the Bank for International Settlements, aiming to promote information exchange and international cooperation among financial regulators.