Chairperson of the Financial Stability Board (FSB) Randall Quarles stated that large-scale stablecoin projects such as Facebook‘s Libra could present regulatory challenges in the future.
FSB sees Stablecoins as a potential threat
Speaking in a presentation at the European Banking Summit in Belgium, Quarles raised concern regarding stablecoin projects. Quarles highlighted Facebook’s Libra stablecoin. Quarles believed that the project had increased public interest in such projects. This may create a snowballing effect that has the potential of bringing a new scale and scope to the ecosystem.
Quarles stated that currently, there is little risk to financial stability. However, he said that the ecosystem’s growth might attract projects that pose regulatory challenges. He claimed that the increasing scale of stablecoins is the main cause of concern.
The G& is currently finishing a preliminary investigation into stablecoins. Meanwhile, the G20 has asked the FSB to guide the investigations from here on.
Is Facebook’s Libra the reason behind stability concerns
Facebook’s Libra has been in the spotlight since its announcement earlier this year. The project has been on the bad side of regulators across the USA and Europe.
Regulators in various countries feel that the financial system is being threatened by the project. Nations are now urging for a cooperative framework that would reduce the threat provided by Libra as well as any future stablecoins.
FSB, similar to Bitcoin, was created in the aftermath of the 2008 global financial crash. The agency is aiming to raise security standards to make sure such an incident never repeats itself.
The watchdog has now been around for over a decade, introducing a list of reforms that it believes have led to a stronger global financial system. The system now can dampen the impact of any potential crisis it may face in the future.