The FSB’s Global Crypto Oversight and AI’s Financial Impact in 2024

The Financial Stability Board (FSB), an organization that oversees the global financial system, has released its plans for the year 2024. These plans include monitoring the implementation of its regulatory framework for activities involving crypto-assets and the financial impacts of digital innovations such as tokenization and artificial intelligence (AI). The FSB aims to ensure the effective implementation of the global regulatory and supervisory framework for crypto-assets, markets, and stablecoin arrangements. This framework was developed by the FSB in July 2023 and recommended to the G20 economies, emphasizing the segregation of clients’ digital assets from their funds and promoting cross-border cooperation among regulators.

Tokenization, which involves converting assets into digital tokens, is also a focus for the FSB. The organization plans to assess the financial stability implications of current and planned asset tokenization projects. By 2024, the FSB aims to complete its work on the financial stability implications of tokenization and present a report to the G20. The FSB intends to provide a report on recent developments in AI and their potential impact on financial stability, along with efforts to enhance cyber resilience. The timeline for the report on AI is set for November 2024, while the report on tokenization is expected in October.

In order to promote greater consistency in the reporting of cyber incidents by financial institutions, the FSB plans to design a format called the Incident Reporting Exchange (FIRE). This format aims to enhance convergence among monetary authorities by facilitating the exchange of information on incidents. The FSB recognized in April 2023 that financial authorities have similar information needs when it comes to cyber incident reporting, leading to the proposal of the FIRE format.

The FSB’s stance on decentralized finance (DeFi) was echoed by the Association for Financial Markets in Europe, which urged European Union lawmakers to include DeFi in the first EU-wide crypto framework. This highlights the FSB’s influence and the significance of its recommendations in shaping global financial regulations.

The FSB’s work program for 2024 focuses on monitoring the implementation of its regulatory framework for crypto-assets and investigating the financial stability implications of tokenization and AI. The organization also aims to improve consistency in cyber incident reporting through the development of the FIRE format. Its efforts to promote global cooperation and regulatory convergence play a crucial role in ensuring the stability of the global financial system.