The Financial Stability Board (FSB) Recommends Banning Decentralized Stablecoins
With global economy taking a bad turn on the outbreak of the novel Coronavirus, global banking and financial institutions have stepped-in weighing the participation and impact of digital currencies on global economy.
Earlier this week, the Financial Stability Board (FSB) released a https://www.fsb.org/2020/04/addressing-the-regulatory-supervisory-and-oversight-challenges-raised-by-global-stablecoin-arrangements-consultative-document/ with a ten-point recommendation for central banks for addressing the supervisory, regulatory, and other oversight challenges raised by global stablecoins.
The FSB is a global body which makes recommendations regarding the global financial systems. Under its ambit, the FSB has asked for a global unified approach for the regulation and supervision of stablecoins. The recommendations have been addressed to all the G20 authorities and central banks at the jurisdiction levels.
Furthermore, the FSB suggests that if central banks can’t properly regulate the decentralized stablecoins, they should just consider banning them. This could mean that the fate of stablecoin operators like Tether looks uncertain.
In its document, the FSB focuses on the potential risks stablecoins present to the global financial stability. The document specifically mentions that the fiat-pegged stablecoins pose higher risks to emerging markets and developing economies.
The FSB has said that central banks can pose major financial problems posed to central banks. The FSB said that if the stablecoin regulations go unchecked it can have a major destabilizing effect on fiat exchange rates and capital flows.
“Authorities should have the ability to mitigate risks associated with or prohibit the use of certain or specific stablecoins in their jurisdictions where these do not meet the applicable regulatory, supervisory, and oversight requirements,” said FSB.
The FSB said that all the relevant authorities should step-up measures to mitigate risks while controlling the custody, trade, and exchange of global stablecoins.
The FSB basically wants that the fiat-pegged cryptocurrencies should no longer operate in a grey zone. They should have a level playing field and adhere to all the rules applicable to banks and other financial institutions like payment processors and e-money issuers.
The FSB stressed that “Authorities should ensure that there is comprehensive regulation, supervision and oversight of the GSC arrangement across borders and sectors. Authorities should cooperate and coordinate with each other, both domestically and internationally.”