According to the Financial Stability Board, stablecoins could help to improve financial inclusion. The body believes that hybrid cryptocurrencies could enhance payments and allow for new ways to provide financial services.
A report by the Financial Stability Board, “Regulation, Supervision and Oversight of
“Global Stablecoin” Arrangements” provides details on risks and recommendations in relation to stablecoins.
Regulators remain concerned about how frameworks will be applied to ensure that their expectations are met, as it relates to AML/CFT, cybersecurity, and operational resilience.
According to FSB report, authorities must:
“Ensure that GSC arrangements have effective risk management frameworks in place especially with regard to reserve management, operational resilience, cybersecurity safeguards, and AML/CFT measures, as well as ‘fit and proper’ requirements”
The report also lists other risks associated with stablecoins such as the decentralised nature of stablecoin arrangements. Interestingly, they believe that the decentralised nature of stablecoins could pose operational and cyber-security risks.
The report suggests that operators of decentralised stablecoins may find it more difficult to act in pursuance of the standards set by the Principles for Market Infrastructure (PFMI).
“In their preliminary analysis, the CPMI-IOSCO considered that, while it may be challenging for systemically important stablecoin arrangements, in particular for those that are partly or highly decentralised, to comply with the standards of the PFMI, systemically important stablecoin arrangements need to adapt to comply with them.”
The supply of stablecoins is relatively low,which may help to quell concerns about its use. The total supply of stablecoins was expected to surpass $20 billion in October, a measly figure when compared to Bitcoin’s market capitalization of $211 billion on October 17.
Stablecoins are a part of the bigger picture in a world where decentralization of assets is scaling at unprecedented rates. The future is decentralized.
Photo by Karolina Grabowska from Pexels