Financial Stability Board (FSB) Chair Randal Quarles has warned global financial regulators that they must accelerate the creation of a framework for cryptocurrency and other forms of digital money, Reuters reported on Wednesday (Feb. 19).
In a letter to finance ministers and G20 central banks, Quarles said they’re in danger of falling further behind as the digital payments sector grows and innovates. He sent the letter ahead of the 2020 IIF G20 Conference happening in Riyadh, Saudi Arabia this weekend, Feb. 22 to Feb. 23.
“Technology is changing the nature of traditional finance; the non-bank sector has grown, and requires deeper understanding and coordination among the supervisory and regulatory community. Pressures that can lead to market fragmentation exist. Concurrently, important supervisory and regulatory issues require attention,” said Quarles — also a U.S. Federal Reserve governor — in the letter.
Central banks have expressed concern over Facebook’s planned rollout of the Libra stablecoin, and worry that it could lead to less state control over money worldwide.
“FSB members recognize the speed of innovation in the area of digital payments, including so-called ‘stablecoins,’” he said in the letter. “We are resolved to quicken the pace of developing the necessary regulatory and supervisory responses to these new instruments.”
He added that regulatory responses would be put before the public in April for feedback.
G20 finance ministers said in draft conclusions of the meeting that all eCurrency risks must be scrutinized and dealt with.
Quarles also outlined the meeting priorities in the letter, and noted that G20 needs “a smooth transition” to a world after the London Interbank Offered Rate (Libor), which is being phased out by the end of 2021. The daily calculated bank-to-bank interest rate is a benchmark for trillions of U.S. dollar-denominated contracts and loans.
The FSB is comprised of national authorities responsible for financial stability in 24 countries and jurisdictions. It was launched following the financial crisis of 2007 to 2009 as an early warning system to avoid another “global market meltdown.” The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.
The FSB said in a December report that there should be “vigilant monitoring” of Big Tech’s move into financial services. As a way to prevent unfair competition, firms like Google, Alibaba and Facebook could be forced to share data with banks and FinTech firms.