MANILA, Philippines — Experts convened in Mactan, Cebu to tackle challenges involving cryptocurrencies, money laundering and the risks arising from the strong growth of the non-bank financial institutions.
During the 23rd Financial Stability Board (FSB) – Regional Consultative Group in Asia Meeting, Bangko Sentral ng Pilipinas Governor Felipe Medalla said the meeting comes at an opportune time due to unprecedented shocks experienced over the last three years arising from the COVID pandemic.
“In addition, market stakeholders have had to adapt to the same changing conditions. We often describe this in the context of a risk-on, risk-off stance, or money is coming in or money is leaving. Here, perception and herd behavior matter, which is yetanother layer of challenge to our jobs,” Medalla said in his opening remarks.
Medalla stressed the importance of collaboration as the world tries to navigate a path forward amid the changing times.
“Very few jurisdictions enjoy the status of driving global markets. Instead, many adjust to the spillovers that emanate from advanced economies and, of course, from shocks, like an epidemic and global shortages along the supply chains,” Medalla said.
The BSP chief said the regional consultative groups would discuss emerging best practices beyond raising awareness as the world is volatile, uncertain, complex, and ambiguous (VUCA).
“This VUCA world, coupled with heightened interconnectedness, will be a perfect storm for shocks, spillovers and systemic risks,” Medalla said.
“Where all these put us is that we face a lot of interlinked uncertainties at both regional and global levels. These affect all of us. One can easily make the case that global disruptions require global solutions,” he added.
In a separate press conference, Medalla said financial stability is not an easy thing to grapple with because it is not something that happens over a few months.
“Crypto, the biggest issue there is, whether we like it or not is quite a lot, especially younger people are actually gambling. They have huge losses, our view right now. Well, you’re there, it’s your problem and the regulation becomes strict the moment crypto meets banking,” Medalla said.
FSB chair Klaas Knot, president of De Nederlandsche Bank, said the work of the regional consultative groups reflects the recognition of the close interconnections within the financial system and also between economies.
“Reforms that were coordinated by the financial stability board following the Global Financial Crisis of 2008 have clearly changed the financial system for the better. But the recent global banking sector turmoil has put these post 2008 reforms to the test. The speed of developments in March, the precise nature of the vulnerabilities that crystallize, and the associated market reactions provide important lessons for financial authorities, including for bank prudential and resolution frameworks,” Klaas said.
During times like this, Klaas said the role of FSB in assessing global financial vulnerabilities and coordinating the development and implementation of international financial standards and as a conduit for information sharing and the regulatory coordination is crucial.
Klaas said the G20 has mandated FSB to come up with a global regulatory framework for crypto assets activities to be implemented either in 2024 or 2025.
“We will come up with a global regulatory framework. It also only makes sense to regulate this from a global perspective. Because, nowadays you can take a server and put it anywhere in the world and start issuing these digital assets,” Klaas said.
According to Klaas there are money laundering issues as crypto currencies come to the fore more often in cases like text fraud, outright trafficking, drugs, money laundering and tax evasions.