The Financial Stability Board (FSB) has published a paper that examines the prospect of global stablecoins (GSCs) — cryptoassets that are pegged to the value of other traditional assets, such as currencies — becoming widely used, and, in turn, giving rise to financial stability risks.
“Technological innovation in the financial sector continues apace and with the Covid-19 pandemic, alternatives to cash may become yet more attractive,” the FSB said, noting that the use of cryptoassets could enhance the efficiency of financial services.
But the FSB said this innovation has the potential to create financial stability risks that could affect “banking, payments and securities/investment regulatory regimes both within jurisdictions and across borders.”
To prepare for those risks, the FSB paper proposes 10 recommendations designed to foster “consistent and effective regulation and supervision” of GSCs and other cryptoassets.
“[The recommendations] call for regulation, supervision and oversight that is proportionate to the risks, and stress the need for flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements that take into account the evolution of GSC arrangements and the risks they may pose over time,” the FSB said.
The paper is out for consultation until July 15. The FSB plans to issue a final report in October.