The Financial Stability Board (FSB) Outlines 2024 Work Programme Focusing on Crypto-Asset Regulation and Digital Innovations
The Financial Stability Board (FSB) has recently released its 2024 Work Programme, which highlights a strong commitment to regulating crypto-assets and a keen focus on the financial implications of digital innovations like tokenization and artificial intelligence (AI). As an international body responsible for overseeing the global financial system, the FSB aims to streamline the implementation of its global regulatory framework for crypto-asset activities. This framework, which was initiated in July 2023, requires crypto platforms to separate clients’ digital assets from the platforms’ own funds, promoting clear separation of interests and strengthening cross-border regulatory cooperation and oversight.
The FSB’s 2024 roadmap encompasses two main areas of focus. Firstly, it prioritizes the complete implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions across all sectors. This is a response to the lessons learned from the banking turmoil experienced in March 2023. Secondly, the FSB aims to harness the benefits of digital innovation, such as AI and tokenization, while effectively managing associated risks.
Enhancing cross-border payments is another critical area of the FSB’s work. In collaboration with the Committee on Payments and Market Infrastructure (CPMI), the FSB is dedicated to developing a cohesive set of actions and a framework to achieve substantial progress by 2027. This includes issuing recommendations to promote alignment and interoperability in data frameworks related to cross-border payments, as well as strengthening the regulation and supervision of banks and non-banks providing these services.
In terms of crypto regulation, the FSB plans to release progress reports throughout the year, with a focus on the interoperability of models facilitating cross-border payments. These principles will be extended to global regulations for banks and non-banks exploring the crypto sector. The FSB recognizes the importance of innovation in the crypto markets, tokenization, AI, and the development of a global stablecoin.
Regarding tokenization, the FSB aims to finalize its work on the financial stability implications of tokenizing real-world assets. This trend is gaining momentum as major banks increasingly adopt blockchain technology. The FSB will also prepare a report for the G20 on recent developments in AI and their potential implications for financial stability. The report on AI is expected to be released in November 2024, while the report on tokenization is slated for October.
Cyber resilience is a key aspect of the FSB’s program. In April 2023, the FSB proposed a standard format called FIRE (Format for Incident Reporting Exchange) for financial institutions to report incidents, facilitating information exchange among authorities. This initiative aims to promote greater convergence in financial institutions’ reporting of incidents to monetary authorities, thus improving consistency in cyber incident reporting.
The comprehensive approach taken by the FSB not only strengthens the global financial infrastructure against emerging digital risks but also ensures a harmonized progression into the era of digital finance. By balancing innovation with stability, the FSB aims to create a secure and efficient financial system that can effectively adapt to the evolving digital landscape.
