G20: Adopted FSB guidance on financial stability implications of tokenisation

On 22 October 2024, the Financial Stability Board (FSB) adopted a guidance on the financial stability implications of tokenisation. The guidance defines tokenisation as using technologies such as distributed ledger technology (DLT) to represent assets as digital tokens. These tokens can represent existing financial assets or new assets that claim against an issuer. The FSB focuses on tokenising financial assets, excluding topics such as central bank digital currencies (CBDCs) and crypto assets. The guidance notes that tokenisation adoption is low, but its use is expanding, particularly for trading, investment, and payments. The guidance identifies financial stability risks associated with DLT-based tokenisation, such as liquidity issues, leverage, asset quality concerns, interconnectedness, and operational risks. These vulnerabilities stem from the underlying assets, the participants in tokenisation projects, and the integration of new technology with existing systems. Although tokenisation's current scale is too small to pose a significant threat to financial stability, potential risks could arise if the sector grows rapidly, leading to increased complexity and unpredictable outcomes during market stress. According to the FSB, authorities should address data gaps, better understand how tokenisation fits within regulatory frameworks, and enhance cross-border regulatory information sharing to manage these risks.