FSB provides overview on Future Global Standards for Stablecoins
- Stablecoins and other crypto assets are a growing focus for the Financial Stability Board (FSB).
- FSB chair stated, numerous stablecoins now in use wouldn’t comply with the global standards established by bodies that define payments or securities standard.
- The FSB will complete its proposals for international stablecoin arrangements by July of this year.
The Financial Stability Board’s (FSB) investigation into commodity markets came after policy makers raised concerns that they were unable to obtain a complete view of a vast open sector that included on and off exchange derivatives trading, physical stocks, patchy data, and producers distributed around the world.
The new proposed guidelines will definitely impact and shape the crypto outlook. According to the Financial Stability Board’s (FSB) Head Klaas Knot, many of the stablecoins now in use would not comply with the high-level” guidelines that will shortly be established by international standard-setters.
The Chair stated that the FSB’s main objective is to implement thorough market regulations, particularly for “unbacked” cryptocurrencies.
In a letter to the G20 financial ministers, FSB chair Klaas Knot stated that recent events, including the collapse of FTX, have brought into focus the underlying shortcomings and inherent turbulence of crypto-assets.
Knot claims “We have already experienced firsthand how risks can spread fast to other components of the crypto-asset ecosystem if a crucial intermediary fails. Moreover, concerns from crypto-asset exchanges could affect the larger financial system if connections to traditional finance strengthen.”
The study also made revelations surrounding the DeFi sector. The paper on the financial stability concerns of decentralised finance (DeFi) emphasises the fact that DeFi’s functions are not significantly different from those of traditional finance. The flaws in that system are carried over by DeFi and might even get worse.
The FSB will build on this work by investigating methods for addressing data gaps for risk monitoring and assessing the extent to which its proposed crypto-asset policy guidelines may need to be strengthened to encompass DeFi-specific vulnerabilities.
According to Knot, stablecoins are viewed as a useful transmission mechanism for financial shocks that can exacerbate concerns to the integrity of the financial system.
The FSB intends to complete its suggestions for regulating cryptocurrency and stablecoins by July, according to its work plan for 2023, which was published on Monday.
The letter discussed cryptocurrencies and stablecoins, highlighting the need for tighter regulation to reduce any potential dangers that could affect the larger financial system.
This year, according to Knot, the FSB will complete its proposals for regulating crypto-assets and stablecoins. In addition to having strong stabilisation measures, the proposals for stablecoin legislation also include “advice to develop governance structures, clarify and reinforce the redemption rights.”