The Financial Stability Board (FSB) will take forward the regulation of cryptocurrencies and AI. What should we expect and how will it affect the market?
Here are some key points to consider regarding the FSB’s plans to regulate cryptocurrencies and AI:
1. The FSB will monitor the implementation of the global regulatory framework for cryptocurrency activities agreed by the G20 in 2023. This could mean tighter oversight and regulation of the crypto industry by national regulators.
2. The FSB will study the implications of tokenization and AI for financial stability and draft reports by end-2024. This could result in additional regulation of tokenized assets and the use of AI in finance.
3. The FSB will develop a standard format for incident reporting exchange (FIRE) to be used at financial institutions. This will improve monitoring of cybersecurity risks in the financial sector.
4. Overall, increased oversight and regulation of cryptocurrencies and new technologies may limit innovation, but also encourage greater institutional adoption by traditional financial institutions.
We can see a certain parallel between the current attitude towards AI in finance and how trading robots and algorithms were previously perceived. When automated algorithmic trading systems first made their appearance and started to gain popularity in the 2000s, there were also concerns about potential market disruption.
Therefore, within the next year or two we should expect stricter rules of the game on the crypto market, especially from G20 regulators. But at the same time, this may also yield some long-term benefits due to increased confidence among institutional investors. Since this process implies a lengthy timeframe, the news had no impact on the market.