FSB 2024 Agenda: Strengthening Crypto Regulation and Embracing AI”

The Financial Stability Board (FSB) has published its 2024 Work Programme, underlining a robust approach towards the regulation of crypto-assets and a keen focus on the financial implications of digital innovations like tokenization and artificial intelligence (AI).

The FSB, an international body responsible for overseeing the global financial system, has set out a comprehensive plan for 2024, pivoting on the need to streamline the implementation of its global regulatory framework for crypto-asset activities, an initiative that began taking shape in July 2023. This framework demands that crypto platforms segregate clients’ digital assets from the platforms’ own funds, ensuring a clear separation of interests and bolstering cross-border regulatory cooperation and oversight.

The FSB’s 2024 roadmap encapsulates a dual focus. First, it prioritizes the complete implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions across all sectors, a response to the lessons learned from the banking turmoil in March 2023. Secondly, it aims to harness the benefits of digital innovation, such as AI and tokenization, while diligently containing their associated risks.

Another critical area of the FSB’s work is the enhancement of cross-border payments. In partnership 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 and strengthening the regulation and supervision of banks and non-banks providing these services.

In the realm of crypto regulation, the FSB plans to issue progress reports throughout the year, focusing on the interoperability of models that facilitate cross-border payments and extending these principles to global regulations for banks and non-banks exploring the crypto sector. The FSB’s approach underscores the importance of innovation in the crypto markets, tokenization, AI, and the development of a global stablecoin.

As for tokenization, the FSB aims to finalize its work on the financial stability implications of tokenizing real-world assets, a trend gaining momentum as major banks increasingly deploy blockchain technology. The FSB will prepare a report for the G20 on recent developments in AI and their potential implications for financial stability. This report is slated for November 2024, while the one on tokenization is expected in October.

A key aspect of the FSB’s program is enhancing cyber resilience. 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.

This comprehensive approach by the FSB not only fortifies the global financial infrastructure against emerging digital risks but also ensures a harmonized progression into the era of digital finance, balancing innovation with stability.

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