. we want to be more open about our assessment, but great care has to be taken to avoid a situation where revelations about emerging concerns lead to acceleration of those concerns and becomes a self - fulfilling prophecy. as i look forward and ponder the forces that are shaping the evolution of the global financial system, the fsb is currently grappling with two issues — financial innovation and market fragmentation — that have the potential to profoundly affect financial stability, so let me start there. owing to our forward - looking orientation, the fsb has been actively engaged in monitoring financial innovation for some time. starting a little over five years ago, there was an explosion of 4 / 6 bis central bankers'speeches financial innovation that had a technological component, which we now call fintech. this encompasses peer - to - peer lending, cryptocurrencies like bitcoin, and the use of new techniques like artificial intelligence and machine learning. in 2017, the fsb issued a report on the implications of fintech for financial stability. the report was careful to note the potential benefits of many of these innovations, including the possibility of greater financial inclusion and increased speed of financial transactions. however, the report also drew attention to several supervisory and regulatory issues, including three priorities where international collaboration is critical : managing operational risk from third - party service providers, mitigating cyber risks, and monitoring macrofinancial risks that could emerge as fintech activities increase. 1 more recently, one particular area of fintech has received a lot of attention — stablecoins. these are a type of crypto - asset that attempts to address the volatility of some crypto - assets by tying their value to conventional assets, such as the value of the u. s. dollar or a basket of currencies. while it hasn ’ t been created yet, it is facebook ’ s proposal for a new stablecoin that significantly increased the public ’ s attention to stablecoins. at the fsb, we undertake regular monitoring of the financial stability implications of crypto - assets, and we have had discussions about the regulatory and supervisory approaches to crypto - assets and potential gaps in regulation. the introduction of stablecoins, however, brings a potentially new scale and scope that the financial regulatory community must carefully consider. although there is a small risk to financial stability today, there is no doubt the potential scale of stablecoins and other crypto - assets yet to emerge may pose regulatory challenges. at present, the

securities for banks and other investors, your organizations should be aware of the importance of remaining informed about emerging accounting interpretations that deal with longaccepted practices - not only in the context of providing products and services to your customers, but also in your own bank - like entities that may be affected as investors. regulatory capital issues let me now move on to some accounting issues that relate broadly to the new capital framework for the largest u. s. - based financial institutions, including broker - dealers who wish to have consolidated supervision for purposes of meeting european union requirements. in general, this entails brokerdealer implementation of basel ii capital requirements. as you know, the basel ii effort to revise bank risk - based capital standards is now in its final stages and moving toward implementation. importantly, that effort has adopted an approach to credit risk for instruments held in the banking book that differs from the current capital rules applied to instruments held in the trading book under the 1996 market risk amendment ( mra ) to the basel accord. clearly, the fair valuing or “ marking to market ” of commercial bank trading portfolios and the implied short - term holding periods of such positions factor into the different approaches. we must remember, however, that the mra was adopted at a time when bank trading portfolios looked very different from today. significant growth in structured transactions, collateralized debt obligations, and credit derivatives are just a few examples of the significant developments over the past several years. moreover, the mra was structured with commercial banks in mind and not broker - dealers who, as you know, mark most of their balance sheets to market. also, both banking organizations and investment firms appear to be holding less - liquid instruments at fair value over longer time horizons than has been traditionally associated with the concept of a commercial bank trading account. taken together, these industry and regulatory dynamics suggest that the time may have arrived for supervisors to begin to review the appropriateness of the 1996 mra for commercial bank trading accounts and investment firm fair - valued holdings. in an initial effort to fully identify the types and characteristics of instruments that banks hold in their trading accounts, and that securities firms hold at fair value, a joint subgroup of the international organization of securities commissions ( iosco ) and the basel committee on banking supervision is surveying the industry. this survey seeks to gain a better perspective on the range of techniques financial institutions are developing to more robustly measure the risk these instruments entail. the information acquired in the survey is to