By Chris Roper
Fiat-pegged stable coins have come under the crosshairs, as the international Financial Stability Board advises central banks to prohibit them.
- The FSB (Financial Stability Board) was set up to coordinate the efforts of national financial authorities at the international level in order to help with the implementation of regulatory and supervisory policies within the financial sector.
A consultative document released yesterday, was in response to a request made by the G20 back in June 2019, for the FSB to examine certain regulatory issues that may arise through the introduction of ‘Global Stable Coins’ (GSC).
The comprehensive 67-page document addresses many perceived challenges that these digital currencies may carry, including their adoption across multiple jurisdictions, risks to financial stability, vulnerabilities caused by multiple functions, cross-border regulation, supervision and oversight.
After describing the threats that these centralised coins may pose, the FSB outlined 10 high-level recommendations aimed at mitigating the potential risks to financial stability and market integrity. One of these recommendations was for central banks to ban stable coins outright. Other proposals are focussed around closing the potential regulatory gaps (or loopholes) that may be exploited in the near future.
The international board also calls attention to further issues that have not yet been addressed such as data privacy, competition policy, taxation, monetary policy, monetary sovereignty, currency substitution, and other macroeconomic concerns.
This document is likely to be acted on, and some now feel that it may be the evidence that the central banks needed in order to take out direct competitors to fiat currency. In December of last year, Christine Lagarde expressed concerns over the confused use cases of stable coins,…