United States: Financial Stability Board Reports On Global Efforts To Monitor Crypto-Asset Markets

The Financial Stability Board ("FSB") published a report describing recent work by global standard-setting bodies ("SSBs") in connection with crypto-asset markets. The report - which was delivered to the G20 Finance Ministers and Central Bank Governors - addresses new monitoring and risk assessment frameworks developed by the FSB, the Committee on Payments and Market Infrastructures ("CPMI"), IOSCO and the Basel Committee on Banking Supervision ("BCBS").

According to the report, the FSB and CPMI developed a framework for monitoring the effect of crypto-asset markets on global financial stability. The FSB asserted that crypto-assets do not currently represent a significant threat to financial stability. The FSB released several metrics for monitoring risk, including metrics on the use of leverage and institutional exposure to crypto-asset markets.

CPMI, as explained in the report, has been closely monitoring developments related to cryptocurrencies and distributed ledger technology. This work has included building analytical frameworks intended to bolster central banks' crypto-asset risk assessments. CPMI intends to (i) continue to advise that central banks "proceed with caution" in developing central bank digital currencies ("CBDCs"), (ii) monitor CBDCs and private token-related developments and (iii) analyze the "safety and efficiency" of wholesale digital currencies.

In addition, the FSB noted that IOSCO has created an Initial Coin Offering ("ICO") Consultation Network and is developing a Support Framework to help address "domestic and cross-border issues stemming from ICOs that could impact investor protection."

The FSB reported that BCBS is (i) assessing the "materiality of banks' direct and indirect exposure to crypto-assets," (ii) evaluating how its members consider banks' exposure to crypto-assets in developing prudential rules and (iii) tracking developments with respect to FinTech.

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