cryptopotato.com
The G20’s Financial Stability Board (FSB) has issued ten recommendations for a common regulation on stablecoins. Their growing usage and volume may undermine financial stability if world governments don’t set up the necessary legislation.
FSB’s Recommendations For Stablecoin Regulation
Reuters reported earlier today the FSB’s intentions to “proportionately” regulate stablecoins. The agency has developed a paper, which it will deliver to G20 finance ministers and central bank governors during a virtual meeting tomorrow – April 15th. The FSB will call for the application of the “same business – same risks – same rules” principle.
Some existing financial laws, including customer checks and payment verifications, already apply in part or in whole to stablecoins. Others, such as coverage, vary in different countries, and it leaves gaps for exploitation.
FSB’s recommendations propose flexible, cross-border cooperation. Thus, the stablecoin issuers won’t be able to choose a more favored jurisdiction. They need to effectively manage risks, be operationally resilient, have safeguards against cyberattacks, and adopt systems for stopping money laundering and terrorist financing, the report noted.
“Relevant authorities should, where necessary, clarify regulatory powers and address potential gaps in their domestic frameworks to adequately address risks posed by global stablecoins.”
The proposed recommendations should apply for existing stablecoins such as Tether and future ones, including central bank digital currencies. According to a BIS study, 80% of world central banks are already working on launching such CBDCs.
The public consultation on the recommendations is open until mid-July 2020. The final version, factoring all responses, will be published in October this year.
The Growing Usage Of Stablecoins
As their name suggests, stablecoins remain steady in times of significant volatility. Traders can use them to exit their turbulently fluctuating positions. A proper example came during the panic sell-off in mid-March. When most of the market tumbled with up to 50%, the total market caps of most stablecoins grew substantially.
The most widely used stablecoin – Tether (USDT) – is minting new coins to cope with the growing demand from traders, as Cryptopotato reported recently. Thus, the number of circulating USDT has grown from 2 billion to over 6 billion in just a year. Tether is now the fourth-seeded coin in terms of total market capitalization.
Other stablecoins such as USDC and Binance USD (BUSD) have been recording massive increases as well. The former’s market cap is at $730m and the latter, launched only seven months ago, is already closing down to $200m.
A JP Morgan report also concurred with the popularity growth of stablecoins. The American multinational investment bank said, however, that they may face serious regulatory hurdles because of the rapid adoption. And, the FSB’s recommendations may be the first significant step in that direction.