FSB Seeks 'Proportionate' Regulations for Stablecoins

The G20’s Financial Supervisory Board (FSB) has made 10 recommendations for properly regulating stablecoins, the digital currencies pegged to fiats or other traditional assets.

In a report published on Tuesday, the G20 supervisory body has pointed out the risks associated with stablecoins, but also pointed out the nature of the risks could change over time.

The body seeks regulations on the sector which are “proportionate to the risks, and stress the need for flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination and information-sharing arrangements that take into account the evolution of 'global stablecoin' arrangements and the risks they may pose over time.”

The recommendation also stressed on a single framework for all such stablecoins irrespective of the underlying Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term technology and calls for a “same business – same risks – same rules.”

Regulating stablecoins - a priority for global regulators

The FSB’s recommendations came following a call by the G20 to study the regulatory hurdles faced by the several “global stablecoin” projects.

Though regulators were reluctant to regulate stablecoins or digital currencies in general, Facebook’s proposal to launch Libra, a stablecoin backed by a basket of assets, made the drafting of regulations at the priority list.

Many top regulatory agencies believe that, if launched, Libra has the potential to disrupt the existing monetary system, given the sheer reach of the social media platform.

“The activities associated with 'global stablecoins' and the risks they may pose can span across banking, Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term and securities/investment regulatory regimes both within jurisdictions and across borders,” the FSA warned.

The body also emphasized the importance of an “appropriate regulatory approach within jurisdictions across sectors and borders” to tackle such threats.

Meanwhile, many regulators are also studying the feasibility of launching central bank digital currencies, in response to the rising demand for the digital form of money.