This week, the Asia unit of the Financial Stability Board (FSB) convened in Hong Kong, bringing together members from India, Cambodia, China, Japan, Korea, Malaysia, New Zealand, and Pakistan, among others. The meeting aimed to share insights on the financial stability implications of crypto-assets, tokenization, and artificial intelligence across the continent. Co-chaired by Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, and P. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, the discussions emphasized collaboration in navigating these evolving challenges.
During the meeting, members of the Financial Stability Board Regional Consultative Group for Asia (FSB-RCG) voiced concerns that the current crypto regulatory landscape is creating an uneven playing field for entities operating outside the regulatory framework, according to an official statement from the organisation.
The crypto sector, that is presently valued at $2.32 trillion (roughly Rs. 1,94,90,934 crore), is undergoing a regulatory restructuring in multiple parts of the world. The European Union (EU) is among the first in the world to have released a comprehensive rulebook to govern industries linked to volatile crypto assets and other Web3 elements. Dubai is among the first Emirates in the UAE to have established an authority body dedicated to oversee the crypto sector.
India, Australia, the UK, and the US meanwhile are still in the process of finalising their respective crypto frameworks. Last year, India spearheaded the G20 group into working on formulating a set of guidelines that can be uniformly deployed over the crypto sector on an international level. Now, Brazil is advancing this research as the current president of the G20.
The FSB, along with the International Monetary Fund (IMF) are also working with the G20 nations to draft this framework. A release timeline is not known at the moment.
Meanwhile, the FSB-RCG observed that the regulatory landscape for crypto is continuously evolving, resulting in the establishment of more exchanges in recent times but also fragmenting liquidity across jurisdictions.
Despite these regulatory advancements, the notorious volatility of crypto remains a persistent challenge.
“Recent market volatility in the region highlights ongoing concerns over the macroeconomic environment,” the statement from FSB-RCG said.
The rise of frauds and scams in the crypto industry was also a topic of concern for the organisation.
“Members acknowledged the relevance of the FSB’s toolkit for third-party risk management, which aims to help financial institutions monitor, identify, and manage risks arising from third- party services. They noted that operational risks are compounded by the increasing number and complexity of financial fraud cases,” the statement added.
In the coming months, the FSB will be releasing a report that will summarise the work on interest, liquidity risk, and depositor behaviour highlighting the role of technology and social media around various aspects of cryptocurrencies.
The FSB comprises six Regional Consultative Groups, formed under its Charter to unite financial authorities from both member and non-member countries for discussions aimed at promoting financial stability. Each RCG typically meets twice a year. The FSB Secretariat is based in Basel, Switzerland.