The G20s financial watchdog has warned that global stablecoins could pose systemic risks to the monetary systems of nation-states. The Financial Stability Board (FSB) has published regulatory recommendations opposing the trans-national ambitions of “global stablecoins,” such as Facebook’s Libra project. The report offers regulatory recommendations to G20 member states and the broader international community intended to prevent stablecoin projects from using opportunities for “regulatory arbitrage” and becoming embedded within national economies’ financial structures.
The report warns global stablecoins could threaten monetary policies.
The FSB report warns that so-called global stablecoins (GSC) could become “systemically important” across jurisdictions, undermining governments’ capacity to dictate monetary and investment policy within their borders. The report stated, “the decentralized nature of GSC arrangements could pose governance challenges; stabilization mechanisms and redemption arrangements could pose market, liquidity, and credit risks.” The Financial Stability Board also noted risks relating to the technology underpinning cryptocurrencies, warning that “the infrastructure and technology used for recording transactions, and accessing, transferring and exchanging coins could pose operational and cyber-security risks.” The FSB also identified unique challenges relating to the collection and storage of data relating to GSC transactions.
The FSB urges lawmakers to establish comprehensive regulatory frameworks for stablecoins.
The G20s financial watchdog FSB emphasizes that global stablecoins’ relatively small adoption currently limits the challenges they pose to nation-states’ financial governance. The financial watchdog urges lawmakers to establish comprehensive regulatory frameworks before GSCs gain significant traction. The FSB stated that ensuring appropriate regulation, supervision, and oversight within jurisdictions and internationally will therefore be important to prevent any potential gaps and avoid regulatory arbitrage. The financial watchdog also recommends collaboration between national supervisory authorities to identify “potential gaps in their domestic frameworks” and “reduce opportunities for cross-sectoral and cross-border regulatory arbitrage.
