Stablecoin initiatives highlight shortcomings in cross-border payments: G7 Working Group
Fri, 18 Oct 2019, 06:21 am UTC
A G7 working group has said that global stablecoins (GSCs) can pose challenges to the international monetary system, while also noting their potential to facilitate a more efficient global payment system.
The working group, chaired by Benoît Cœuré (Chair of the CPMI), has published a new report, entitled “Investigating the impact of global stablecoins,” which was requested by the G7 Finance Ministers and central bank Governors.
“Due to their potentially large size and reach, GSCs could additionally pose challenges to fair competition, financial stability, monetary policy and, in the extreme, the international monetary system(Cœuré (2019c)). They may also impact the safety and efficiency of the overall payment system. These challenges stem, in part, from the fact that GSCs may transform from a cross-border payment solution to assets with money-like features,” it said.
Underscoring the potential adverse effects of stablecoins, the G7 emphasized that “no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks…are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportional.”
In particular, the report discusses the challenges and risks posed by stablecoins for public policy, oversight and regulation, anti-money laundering and countering the financing of terrorism compliance, and tax compliance, among others.
However, the report pointed out that GSC initiatives have highlighted the shortcomings in cross-border payments and the importance of improving access to financial services and cross-border retail payments.
It recognized the potential of stablecoins to be “more readily usable as a means of payment and store of value” and promote the development of global payment arrangements that are “faster, cheaper and more inclusive than present arrangements.”
“[Stablecoins] may be able to address some of the shortcomings of existing payment systems and deliver greater benefits to users,” it said.
The Chamber of Digital Commerce, a trade association representing the digital asset and blockchain industry, welcomed the report and said that it is “an important resource for global policymakers and regulators to consider in evaluating stablecoins like Libra, ensuring a vibrant and properly functioning marketplace.”
Just recently, Financial Stability Board (FSB) Chair Randal K. Quarles also highlighted the challenges posed by global stablecoin to the regulatory community in a letter to G20 Finance Ministers and Central Bank Governors.
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