• The Financial Stability Board (FSB) will publish recommendations for regulating crypto and stablecoins in July 2023.
• Many existing stablecoins would not meet the “high-level” recommendations set by global standard setters like the FSB.
• Regulators around the world have been taking steps to oversee payments-focused stablecoins, but their measures may not be enough.
Financial Stability Board’s Forthcoming Global Standards
The international standard setter’s recommendations for regulating crypto and stablecoins are set to be released in July 2023. According to its work plan for 2023 published on Monday, the Financial Stability Board (FSB) is set to finalize its recommendations for regulating crypto and stablecoins by July. Stablecoins are cryptocurrencies pegged to the value of other assets like the U.S. dollar or the euro.
Existing Stablecoins May Not Meet Standards
Many existing stablecoins would not meet the “high-level” recommendations soon to be set by global standard setters like the FSB, its chair, Klaas Knot, said on Monday. The FSB’s upcoming guidance targets the strengthening of stablecoin governance frameworks, redemption rights and stabilization mechanisms, Knot said in a letter to G-20 finance ministers and central bank governors. In his letter, Knot added that many existing stablecoins wouldn’t meet the international norms set by payments or securities standard setters either.
Regulatory Efforts Around The World
Regulators around the world have been taking steps to oversee payments-focused stablecoins, most of which are backed by fiat currency reserves in the form of cash equivalents – or more infamously by unsecured short-term debt. While stablecoin issuers have made efforts to cut private debt out of their reserves and improve transparency, Knot’s message indicates these measures may not be enough.
Risk To Financial Stability
In February 2022, the FSB warned that crypto risks to financial stability “could rapidly escalate.” Regulators around the world, including the FSB, have been increasing efforts to oversee