The Group of 20’s Financial Stability Board (FSB) has urged leaders to closely monitor the burgeoning private credit markets and stablecoins. In a letter published on Thursday ahead of the G20 summit in South Africa, FSB Chair Andrew Bailey advocated for global efforts to modernise and strengthen financial regulations to safeguard stability. The letter emphasised the increasing prominence of non-bank financial intermediaries, particularly private credit markets, identifying it as a key area of focus for the FSB in the coming year. The FSB monitors and makes recommendations about the global financial system. It aims to promote international financial stability.
Bailey underscored the urgency of improving cross-border payment systems and developing robust regulatory frameworks for stablecoins, which are cryptocurrencies pegged to assets like the U.S. dollar. He cautioned that regulatory divergences across jurisdictions regarding stablecoins could introduce complexity and potential risks. Addressing how stablecoins can operate safely and effectively across borders remains a priority, with policymakers outside the U.S. concerned about the potential for dollar-backed stablecoins to erode monetary policy powers and raise bailout concerns.
Furthermore, the letter addressed the slow implementation of global banking standards, including Basel III, by major economies. The Basel Committee on Banking Supervision reiterated that the full and consistent implementation of tougher capital rules remains its highest priority. While the reforms were agreed upon in 2017, the European Commission and Britain have delayed Basel 3.1 implementation until 2027, awaiting clarity from the U.S., which has resisted the plans.
In response to pressure, Basel is reconsidering aspects of its rules. Basel Committee chair Erik Thedéen indicated that crypto exposure requirements need revisiting to reflect the significant growth of stablecoins since the rules were initially agreed three years ago. The crypto framework is scheduled to take effect on January 1, although the U.S. and the UK have not yet committed to this date.
