Stablecoins are beginning to generate pushback from regulatory bodies around the globe, particularly after the media attention brought to Facebook’s libra over the last several months.
Despite offering investors a less volatile form of cryptoasset, the marketplace for stablecoins has come under scrutiny by regulators concerned by the impact of digital currencies.
Randall Quarles, chair of the Financial Stability Board (FSB), believes that the rise in stablecoins such as Facebook’s libra will produce future “regulatory challenges.” The FSB was developed following the global financial crisis of 2008 as a board to develop and implement standards to prevent subsequent economic meltdowns.
Quarles made his comments at a presentation at the European Banking Summit in Belgium on Oct. 3.
In addition to libra pressing regulators, Quarles argued that the high profile digital currency has brought widespread attention to stablecoins, and will lead to the development of many more projects. Such an increase in scale and scope could lead to unanticipated challenges that regulators need to be prepared for.
Although there is a small risk to financial stability today, there is no doubt the potential scale of stablecoins and other crypto-assets yet to emerge may pose regulatory challenges.
The intergovernmental organization G7 is in the midst of an investigation into libra and the impact of stablecoins, with the FSB tasked to lead the initiative.
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