There has been a lack of progress by almost 50 jurisdictions on furthering stablecoin regulations globally according to a report published today by the Financial Stability Board (FSB), an international body the G20 has tasked with monitoring and making recommendations on world financial system stability.
48 jurisdictions have failed to make progress on the “Regulation, Supervision, and Oversight of ‘Global Stablecoin’ Arrangements”, which the global watchdog introduced a year ago, Coindesk reported.
The FSB bemoaned the fact that implementation of its 10 “recommendations” for regulating stablecoins from October last year was still at an “early stage.” The watchdog said in a statement:
Jurisdictions have taken, or are considering, different approaches towards implementing the recommendations. To address the risk of regulatory arbitrage and harmful market fragmentation and the greater financial stability risks that could arise were stablecoins to enter the mainstream of the financial system, effective international regulatory cooperation and coordination are critical.
Support for a comprehensive governance framework is lacking
The recommendations range from establishing a comprehensive framework for governance, more specifically related to a 1:1 currency peg between cryptocurrencies and a sovereign fiat currency, to giving relevant authorities the power to regulate stablecoins.
According to the report, institutions like The International Organization of Securities Commissions and the Basel Committee on Banking Supervision have identified issues that countries have not covered in their efforts to regulate stablecoins against the backdrop of increasing adoption. These organizations are evaluating the ways, in which existing international standards apply to global stablecoin arrangements. The FSB writes:
Ensuring appropriate regulation, supervision, and oversight across sectors and jurisdictions will therefore be necessary to prevent any potential gaps and avoid regulatory arbitrage. Differing regulatory classifications and approaches to stablecoins at jurisdictional level could give rise to the risk of regulatory arbitrage and harmful market fragmentation.
The FSB added that a number of issues have been identified in relation to the implementation of its recommendations that need to be taken into account. Those include investor protection, conditions for qualifying a stablecoin as a “global stablecoin” and other requirements for wallet providers, custodians, and issuers relating to global stablecoins.
G7 stands against stablecoins
Last year, the G7 economic bloc, comprised of the Germany, France, the US, Canada, Japan, Italy, and Britain, pledged to block any stablecoin that launches on a global exchange or otherwise without meeting regulatory requirements. The FSB said regulators have outlined redemption rights and cross-border coordination and cooperation among jurisdictions.
