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In this interview with Beth Haddock, the Global Policy Lead at Stablecoin Standard, we dive deep into the challenges and opportunities in the stablecoin space. Beth shares insights into how the Stablecoin Standard is setting new benchmarks for credibility, transparency, and regulatory compliance in the industry. As stablecoins gain traction worldwide, their role in shaping the global financial system is more critical than ever.
Q1. Can you share the vision behind the Stablecoin Standard and its role in shaping the global stablecoin ecosystem?
The vision behind the Stablecoin Standard is to accelerate the growth of stablecoins by ensuring that high-quality innovators can thrive in the space.
Stablecoin Standard represents 28 global members, including partners and issuers, all committed to driving the global adoption of digital money through education, best practices, and policy engagement. Our mission is to empower issuers and partners to demonstrate their commitment to responsible innovation, positioning stablecoins as a solution for cross-border payments and an enhancement to traditional financial services for consumers and businesses.
Q2. What key challenges do stablecoin issuers face today, and how does Stablecoin Standard (SCS) aim to address them?
One of the biggest challenges is credibility. Stablecoins must prove their ability to remain stable during market and economic stress. Overcoming this is crucial to demonstrating that stablecoins are a viable improvement over traditional financial tools.
Through its new Standards and growing ecosystem of signatories, SCS is helping reshape this narrative by bolstering the credibility of stablecoin issuers, providing a clear framework that ensures transparency and trustworthiness.
Q3. Could you walk us through the industry standards for stablecoins that were recently finalized in Singapore?
Certainly. These Standards are built from an inventory of existing and proposed regulations. They focus on three key pillars: 1) Operational resilience to ensure financial stability, 2) Transparency and ethical business practices, particularly regarding consumer protection, and 3) Issuer commitments, including financial crime prevention programs. These principles are the foundation of responsible innovation, ensuring stablecoins clearly demonstrate their commitment to good governance as the industry evolves.
In more detail, the Standards address 10 specific areas:
- Stablecoin Definition: Stablecoins must be fiat-backed or e-money tokens, with 1:1 reserve ratios backed by high-quality liquid assets (HQLA).
- Reserve Management: Reserves must be stress-tested and overcollateralized where possible, with daily valuations to ensure full backing.
- Risk Mitigation: Issuers must avoid undue risks with reserves, managing assets for liquidity and timely redemption.
- Transparency in Governance: Issuers must adopt transparent governance with independent board oversight.
- Public Reporting: Monthly reports on circulating stablecoins, reserve assets, and composition, with public attestations.
- Consumer Protection: Clear disclosures on product features, risks, pricing, and redemption.
- Business Ethics: Issuers must adhere to ethical standards and protect users’ privacy, with a professional team of high integrity.
- Financial Crime Prevention: Strong measures against fraud, market manipulation, and compliance with cybersecurity and AML requirements.
- Regulatory Compliance: Issuers must establish risk management programs in line with applicable regulations.
- StableCheck: A planned verification process to further validate issuer compliance and build market trust.
The Standards can be found on the SCS website. https://www.stablecoinstandard.com/policy/standards
Q4. How does the introduction of these standards impact stablecoin issuers, particularly in terms of regulatory compliance?
These Standards give stablecoin issuers a framework to either elevate their practices in jurisdictions with limited regulation or complement existing regulatory obligations. The Standards create an industry benchmark for best practices, which helps dispel concerns about the reliability and safety of stablecoins.
Q5. What criteria must stablecoin issuers meet to adhere to these standards, and how does Stablecoin Standard facilitate that process?
Stablecoin Standard currently has 17 participants committed to adhering to the Standards, with a target for full membership by the end of 2025. We also plan to launch “StableCheck,” a verification system to ensure issuers meet the required criteria and maintain their commitments.
Q6. How is Stablecoin Standard collaborating with global regulators to ensure stablecoin adoption while maintaining financial stability?
We’ve already initiated dialogue with regulators, sharing both our processes and the resulting Standards. We plan to continue engaging with regulators to foster greater awareness and collaboration, and we hope that this interview helps accelerate that process.
Q7. What role do you see for traditional financial institutions in the stablecoin ecosystem as these standards evolve?
We welcome traditional financial institutions to join the Stablecoin Standard initiative. Some SCS members are subsidiaries of traditional financial institutions, and we invite others to join the SCS and collaborate with blockchain-native issuers to advance the stablecoin ecosystem.
Q8. How do global industry standards help drive stablecoin adoption across different regions and industries?
In our research, we identified common regulatory themes across different regions. The Standards focus on operational resilience, transparency, and consumer protection—addressing key concerns that have slowed adoption. By aligning with these global themes, the Standards are designed to remove obstacles to growth and accelerate stablecoin adoption worldwide.
The Standards are designed to ease cross-border frictions and ensure interoperability. SCS will advocate for deference across jurisdictions so that well-regulated stablecoins in one jurisdiction are recognized in substantially similar jurisdictions.
Q9. What steps is Stablecoin Standard taking to engage with both traditional and decentralized finance (DeFi) players in its ecosystem?
Stablecoin Standard’s 28 global members represent both traditional finance (TradFi) and decentralized finance (DeFi) players. SCS founders also come from a mix of these backgrounds. We’re actively recruiting new members from across the financial spectrum to build a well-rounded ecosystem.
Q10. How do Stablecoin Standard’s member organizations collaborate to refine the standards and ensure effective implementation?
Members collaborate through regular working groups, policy discussions, and advisory board meetings. As adoption increases, we’ll continue refining the Standards and developing the StableCheck process to maintain their relevance and effectiveness.
Q11. What measures are in place to ensure transparency and accountability among stablecoin issuers adhering to these standards?
StableCheck will play a crucial role in ensuring transparency and accountability by providing issuers with a clear method to demonstrate compliance with the Standards. This process will also help issuers improve their internal practices before external audits or scrutiny from investors, regulators, or consumers.
Q12. In your view, how will the widespread adoption of stablecoins impact the global financial system in the next decade?
Stablecoins are currently the leading use case for crypto. Widespread adoption will likely lead to broader blockchain and crypto adoption while also transforming global payment processing for both individuals and institutions; for instance, by lowering costs and innovating collateral settlement.
Q13. What advice would you give to regulators who are skeptical about the role of stablecoins in the future of finance?
It’s natural for regulators to be skeptical of new technologies—it’s their job to evaluate risks. However, I’d encourage regulators to balance skepticism with curiosity. A deeper understanding of stablecoins and their potential can lead to more informed decisions, rather than ones driven by fear or misunderstanding.
Beth Haddock’s insights highlight the importance of establishing global standards for stablecoins, ensuring their stability, transparency, and integration into the broader financial system. As Stablecoin Standard continues to engage with regulators and industry players, the path for stablecoin adoption and responsible innovation becomes clearer, paving the way for future growth in digital currencies.