- FSB report outlines progress made in the adoption of Stable coins on the global front.
- FSB identified issues related to implementation that stakeholders need to consider.
On Thursday, The Financial Stability Board (FSB) outlined the progress made on regulation, supervision, and oversight of “Global Stablecoin Arrangement” for the first time since the global watchdog introduced the laws. The report detailed the performance of 48 jurisdictions covered by the Global Stablecoin Arrangement.
The G20 mandates the FSB to monitor and make recommendations related to the stability of the world’s finances and financial systems. The oversight authority noted that implementing its recommendations for stablecoins regulation data requires some time and that it was at an early stage.
Details of the report
The FSB report noted that member jurisdictions were using different tactics to evade imposing the suggestions proposed. The oversight authority further stated that cooperation and coordination are crucial to achieving efficient regulatory practices. Poor regulation of Stablecoin would cause marketplace defragmentation if stablecoins were to go mainstream. The suggestions vary from vesting oversight authority on governments to having a complete governance framework as cryptos involve being pegged 1:1 on a sovereign fiat currency.
The report also noted that the Global Group of Commissions, in conjunction with the Basel Committee on Banking, are mandated with ensuring solutions needed for the regulation of world stablecoins are not compromised by nations seeking to subvert the system.
The FSB Recommendations
Late last year, the board recommended that governments control global Stablecoin to avoid disrupting the global economy. The FSB proposed ten recommendations for data safeguards, governance frameworks, and other critical issues related to stablecoins. A section of the FSB report called for adopting suitable laws to enhance supervision and oversight across relevant sectors and jurisdictions to avert gaps and avoid regulatory arbitrage. FSB noted that different approaches and regulations might result in market fragmentation and arbitrage.
Areas of concern
The Financial Stability Board revealed that it had also identified previous recommendation issues for consideration. Some of the issues mentioned were: conditions required for Stablecoins to be classified as a “world Stablecoin,” investor protection, issuer requirements, stablecoins wallet providers, and custodian issues. The regulator also highlighted areas of concern, including redemption rights, jurisdiction coordination, mutual recognition, and cooperation between stakeholders. A further review of the recommendations is expected to have been through in two years. This time, the FSB will consult other standard-setting authorities to achieve an inclusive reviewing process.
The FSB report stated that its non-binding proposals are still required to be tailored for certain jurisdictions to help in ensuring that stablecoins serve their purpose and prevent private currency competitors from disrupting the world economy.