TL;DR: The FSB urged the G20 to coordinate oversight of stablecoins and AI risks, Australia’s ASIC proposed extending and widening its CFD rules to cover digital-asset settlement, and South Korea’s Jeonbuk Bank reportedly began lending against Bitcoin collateral.
Key Takeaways:
As digital assets increasingly intertwine with traditional finance, regulators are working overtime to address emerging risks while also grappling with the rapidly evolving threats posed by artificial intelligence (AI). At the same time, private-sector enthusiasm for financial innovation shows no signs of waning, as financial institutions explore new ways to engage with digital assets within the existing system.
This week, the Financial Stability Board (FSB) urged coordinated oversight of AI and stablecoins, as Australia proposed broader protections for retail derivatives traders, and a South Korean bank reportedly began lending against Bitcoin.
Financial stability body chief warns of risks related to AI and stablecoins
The FSB, an international body that monitors and makes recommendations on the global financial system, published on October 12 a letter from its chair, Andrew Bailey, highlighting risks to the global financial system, including those related to stablecoins and artificial intelligence, such as increasingly sophisticated AI-enabled cyber threats.
The letter was addressed to G20 Finance Ministers and Central Bank Governors ahead of their October 15 meeting. It included suggestions for enhanced monitoring of cross-border vulnerabilities and for fostering cross-border cooperation and information sharing.
On the subject of AI, Bailey’s letter warned that the technology requires continued close attention alongside careful management by financial institutions. With that in mind, he submitted the FSB’s “Sound Practices for the Responsible Adoption of AI” to the G20 meeting, which was developed with engagement from the AI industry and designed as a toolkit adaptable to the size, type, and level of AI adoption within financial institutions.
The practices span organization-wide AI governance, life-cycle management, cyber risk mitigation, and management of third-party services, offering practical guidance on firms’ use of AI.
“To foster responsible adoption, I urge the G20 to champion these practices,” Bailey said. “The rapid pace of development means that focusing on safe adoption of AI across the financial system should remain an important feature of the FSB’s agenda next year.”
While sound practices aim to support financial institutions’ responsible AI adoption, the FSB chair also emphasized that broader macro-prudential issues may warrant continued consideration and coordination.
Another key focus for the FSB over the past year has been stablecoins. As such, the international body also produced a note on “Cross-border Vulnerabilities and Financial Stability Monitoring of Global Stablecoin Arrangements,” which summarized work on both data issues related to monitoring stablecoins and the assessment of cross-border vulnerabilities.
“Global stablecoin arrangements are inherently cross-border, yet national regulations are taking shape at different speeds and cross-border cooperation in this area is still in its infancy,” Bailey said. “As G20 members continue to evolve their regulatory frameworks for stablecoins, I want to emphasise the importance of ensuring that these frameworks have a clear focus on financial stability and work together effectively across the globe.”
He added that global stablecoins continue to feature prominently in discussions on fraud and related financial crime issues, “particularly those operating from lightly regulated jurisdictions, which can have financial stability implications.”
The FSB note highlighted that the interaction of regulatory frameworks across borders remains uncertain or undefined in many jurisdictions, including regarding the treatment of foreign-issued stablecoins.
“A global stablecoin arrangement may operate across multiple entities and regulatory regimes, while mechanisms for cross-border oversight, crisis management, accountability and cooperation in stress or insolvency, remain immature or are not yet developed,” said the FSB Chair.
The letter also identified further areas of FSB work to address these challenges, including enhanced monitoring of cross-border vulnerabilities; supporting the implementation of the FSB’s 2023 recommendations on global stablecoin arrangements; strengthening cross-border cooperation and information sharing; and gathering information on emerging approaches to planning for the distress or failure of a global stablecoin arrangement.
Bailey rounded off his stablecoin comments by reiterating that “facilitating greater consistency of outcomes in line with the FSB’s 2023 recommendations is a necessary step to supporting the objective of enabling the safe use of stablecoins across borders.”
While the FSB is focused on coordinating oversight of risks that could affect the global financial system, national regulators are also tightening protections in markets where retail investors face significant exposure. In Australia, that effort includes proposed changes to the rules governing contracts for difference, including derivatives settled through digital assets.
Australia moves to tighten crypto derivatives rules
Australia’s securities regulator, the Australian Securities and Investments Commission (ASIC), announced on Monday that it is seeking feedback on proposals to expand its rules for ‘contracts for difference’ (CFDs), which allow traders to speculate on asset price movements without owning the underlying asset.
CFDs are complex, high-risk products. For this reason, the current rules—known as the ASIC Corporations (Product Intervention Order—Contracts for Difference) Instrument 2020/986, or CFD PIO—limit the leverage available to retail clients and provide protections that reduce the scale and speed of potential losses.
According to the regulator, despite the reduction in harm achieved by the CFD PIO since its introduction in March 2021, retail client losses remain substantial. In the 2023–24 financial year, 68% of retail clients who traded CFDs made a net loss, with aggregate net retail client losses exceeding AUD 458 million ($319.4 million), including AUD 73 million ($50.9 million) in fees. Additionally, 85% of retail clients trading CFDs over options made a net loss.
To address this, ASIC proposed to continue the CFD PIO protections, which are currently due to expire on May 23, 2027, for a further 10 years, in addition to several targeted amendments that address “industry practices and product developments identified through our regulatory work since the CFD PIO first came into effect.”
Most of the proposed amendments clarify or refine the existing framework, but the regulator also proposed to modernize the definition of a CFD “to ensure products with the same economic characteristics and risks as CFDs are treated consistently, whether they are settled in cash, by set-off or through the transfer of digital assets.”
Currently, the rules generally cover contracts settled in cash or by offsetting obligations. ASIC’s proposed amendments would expand the CFD framework to cover qualifying derivatives settled through digital-asset transfers, including products linked to non-crypto assets.
Such products would still need to meet the other criteria for classification as CFDs, while some fixed-expiry crypto derivatives, including certain futures and options, would remain excluded.
The extension and amendments remain proposals for now, with ASIC inviting feedback on the changes until November 9, allowing market participants to help shape the rules.
Meanwhile, in South Korea, the private sector is already seeking to reshape the relationship between digital assets and traditional finance by introducing BTC as collateral for conventional business lending.
South Korean bank launches Bitcoin-backed lending
South Korea’s Jeonbuk Bank, a subsidiary of JB Financial Group, has reportedly become the country’s first commercial bank to accept BTC as collateral for won-denominated lending, by issuing Bitcoin-backed loans to its corporate customers, according to a report from local outlet Edaily.
Citing financial industry sources, the report said that Jeonbuk Bank had begun offering won-denominated loans backed by digital assets. The BTC used as collateral is held within the management system of a specialized custodian and management provider, with Jeonbuk Bank itself not holding ownership of the digital assets or having direct control over them.
For now, the eligible collateral is reportedly limited to Bitcoin, given its largest market capitalization and trading volume among digital assets, which provide strong price discovery and benchmark reliability. In addition, the use of the loan proceeds is restricted to funds necessary for corporate business operations.
According to the Edaily report, Jeonbuk Bank conducted its own stress tests and confirmed that Bitcoin remains stable as collateral, even during sharp price declines.
A bank representative told the local outlet Chosun that it had already issued a loan but declined to disclose the borrower, the loan amount, the interest rate, or the loan-to-value requirements.
Regarding measures for collateral management, the official also reportedly told the outlet that the bank plans “to enhance systems such as collateral value monitoring and recovery in accordance with future regulatory changes.”
Earlier this month, South Korea’s top finance regulator, the Financial Services Commission (FSC), revealed that it was reconsidering its digital currency regulations and reviewing whether to introduce a formal market-making system.
This came in the wake of the price of JPYC, a Japanese-yen-pegged stablecoin, surging to over three times its value following its September 17 listing on South Korean digital currency exchange Upbit, which resulted in the market opening at KRW 12 ($ 0.0088) per token and climbing to a peak of KRW 37.6 ($0.028) an hour later—more than four times its estimated yen-linked market value.
FSC Director of digital finance policy, Yoo Young-joon, said the agency would be examining the issue at a Seoul conference.
“We will also review the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape,” Yoo said at the time, adding that “demands for discipline in this area are expanding.”
What does it all mean?
Together, these various developments illustrate the increasing complexity of the relationship between emerging technologies, digital assets, and traditional finance.
While international bodies push for stronger coordination on AI and stablecoin risks, and regulators refine protections for crypto-linked products, private-sector entities continue to explore new ways to put digital assets to work, in turn giving authorities more to consider.
This tug-of-war ultimately boils down to an ongoing effort by regulators, lawmakers, and market participants to balance innovation and access with effective oversight, sound risk management, and financial stability.
FAQs:
What did the FSB say about stablecoins and AI?
The FSB told G20 leaders that stablecoins are inherently cross-border, that regulation is developing unevenly, and that AI, including AI-enabled cyber threats, needs close attention. It also submitted AI adoption guidelines.
What are the FSB’s Sound Practices for the Responsible Adoption of AI?
They are an adaptable toolkit for financial institutions covering AI governance, life-cycle management, cyber risk mitigation, and third-party services. They were developed with input from the AI industry.
What is Australia’s contract for difference (CFD)?
A CFD is a high-risk derivative that lets traders speculate on an asset’s price movements without owning the asset. ASIC’s rules limit retail leverage and reduce the scale and speed of potential losses.
How many Australian retail traders lose money on CFDs?
In 2023–24, 68% of Australian retail CFD traders made a net loss, according to ASIC. Aggregate losses exceeded AUD 458 million ($319.4 million), including AUD 73 million ($50.9 million) in fees.
What is ASIC proposing for CFD rules?
ASIC wants to extend the CFD protections, which are due to expire on May 23, 2027, for 10 years. It would also cover qualifying derivatives settled through digital assets. Feedback is open until November 9, 2026.
Which South Korean bank is accepting Bitcoin as collateral?
Jeonbuk Bank reportedly became South Korea’s first commercial bank to accept BTC as collateral for won-denominated corporate loans. A specialized custodian holds the BTC, not the bank.
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