The Bank for International Settlements (BIS) and the Financial Stability Board (FSB) presented new reports on tokenization to G20 leaders ahead of the Finance Ministers and Central Bank Governors meeting on Oct. 23-24. With Brazil holding the G20 presidency, the agenda includes a focus on digital currency and tokenization following India’s lead last year.
Both the BIS, with its Committee on Payments and Market Infrastructures (CPMI), and the FSB issued separate tokenization studies on Oct. 22, highlighting common views: tokenization has the potential to offer efficiency and security benefits but carries risks familiar to traditional finance, including liquidity and operational challenges. The FSB report noted that tokenization lacks a universally accepted definition, and due to its limited scope, currently poses minimal financial stability risks.
The BIS and FSB emphasized that while tokenization could reshape market structures by integrating intermediary roles on single platforms, it introduces risks like credit, custody, and cyber vulnerabilities. Both organizations recommend international cooperation on regulatory frameworks, with the FSB specifically advocating for enhanced monitoring and information sharing among central banks.
Building on prior G20 discussions on crypto regulation, the BIS Innovation Hub is already exploring tokenization projects with central banks worldwide.
Featured image from: cointelegraph.com