Tokenisation could have implications for financial stability if it scales up significantly, if it is used to create complex and opaque products that trade in an automated fashion, and if identified vulnerabilities are not adequately addressed through oversight, regulation, supervision, and enforcement. Klaas Knot, the FSB chair, articulated these concerns in addressing the Group of 20 nations, emphasizing the need for regulatory frameworks to mitigate associated risks.
The Financial Stability Board identified three vulnerabilities of tokenization, which include the underlying "reference asset" that has been tokenized; the participants in DLT based tokenization projects; and the interaction of new technology with legacy systems. These vulnerabilities could pose significant risks if tokenization scales up without proper oversight or regulatory measures.
Nations around the world have been exploring tokenization, with the FSB highlighting it as a priority for monitoring. The importance of tokenization in the global financial landscape is underscored by over 40 firms that joined the Bank for International Settlements to explore its use for cross border payments, indicating the technology's growing relevance.
Collection
[
|
...
]