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Financial Stability Board (FSB) Chair Randal K. Quarles has highlighted the challenges posed by global stablecoin to the regulatory community in a letter to G20 Finance Ministers and Central Bank Governors.
Quarles stressed that these global stablecoins “have the potential to become systemically important, including through the substitution of domestic currencies” and pose a number of challenges to regulators around the world.
“These include challenges for financial stability; consumer and investor protection; data privacy and protection; financial integrity including AML/CFT and know-your-customer compliance; mitigation of tax evasion; fair competition and anti-trust policy; market integrity; sound and efficient governance; cyber security and operational risks; and an appropriate legal basis,” he added.
However, Quarles noted the Osaka Declaration by G20 Leaders which said that crypto-assets do not currently pose a threat to global financial stability. The global leaders also believe in the potential of technological innovations to bring significant benefits to the financial system and the broader economy, particularly in the area of cross-border payments and remittances.
Further underscoring the need to subject stablecoin projects to highest regulatory standards, Quarles said that the G20 Leaders asked the FSB to advise them on any additional multilateral responses as needed, given recent developments.
“The FSB is assessing how the existing regulatory framework applies to “global stablecoins” and whether any regulatory gaps need to be filled. In any case, it is essential to apply the principle of ‘same activity – same rules’, independent of the underlying technology,” he said that the FSB has formed a working group tasked with examining the regulatory issues raised by stablecoins that could to reach global scale.
Quarles added that the FSB is submitting an issues note on global stablecoins to the October 2019 G20 Finance Ministers and Central Bank Governors meeting. It will submit a consultative report to the G20 Finance Ministers and Central Bank Governors in April 2020, followed by a final report in July 2020.
Meanwhile, in a draft report, the G7 group has said that Facebook's cryptocurrency project Libra must not go ahead until the firm proves its safety and security, BBC reported.
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