The report also highlights the need for financial institutions and authorities to improve their ability to assess risks associated with climate change and digitalized assets. The Council is reportedly developing a framework for identifying and evaluating climate change-related risks and recommends better coordination of data and risk assessment. It also points out the potential vulnerabilities in financial stability due to operational risks, volatility in crypto-asset prices, and the growth of platforms operating illegally in the digitalized landscape. The Council urges agencies to enforce existing laws and policies relevant to the crypto-asset ecosystem and advises Congress to enact laws governing the regulation of stablecoins and non-security cryptoassets.
Key takeaways:
- The Financial Stability Oversight Council has flagged Artificial Intelligence (AI) for the first time as a risk in the U.S. financial system, due to its complexity and opacity.
- The Council advises businesses and regulators to expand their knowledge and monitoring of AI innovation and usage, and to consider new risks to the financial system while encouraging innovation and efficiency.
- The Council also recommends financial institutions and authorities to improve their ability to assess the risks associated with climate change, and to develop a framework for identifying and evaluating these risks.
- The report also highlights the risks of financial stability in terms of the growing digitalized landscape, including operational risks, the possibility of runs on stablecoins and crypto-asset platforms, and the concentration of token ownership.