FSB addresses stablecoin risks in emerging markets

The Financial Stability Board (FSB) is taking a closer look at the use of stablecoins in emerging markets.

The watchdog group made the announcement after a plenary board meeting in Toronto.

“In emerging markets and developing economies (EMDEs), crypto-assets present particular challenges for monetary policy and capital flow management,” the board said.

“Members discussed the challenges posed by the relatively higher levels of adoption and risks of global stablecoin arrangements in EMDE. The FSB will undertake further work to consider how these challenges can be addressed.”

Reporting on stablecoin regulation efforts last week, PYMNTS wrote that the digital asset “is placed at the heart of the crypto sector’s goals for a return to form.”

That’s because these assets, designed to store a stable value by being tied to a reserve asset like a fiat currency or a commodity like gold, aim to offer the benefits of cryptocurrencies — such as security, privacy and fast turnaround times. of the transaction – minimizing price volatility.

The end of this month will see the implementation of the stablecoin regulations of the Markets in Crypto-Assets Act (MiCA), part of the EU’s larger strategy to bring clarity and certainty to the crypto-asset market. It aims to protect consumers, strengthen financial stability and drive innovation within the digital currency space.

“By establishing clear guidelines for the operation of stablecoins, MiCA seeks to mitigate the risks associated with these digital assets, such as volatility and potential market manipulation,” PYMNTS wrote.

“At the same time, the implementation of MiCA is occurring against a backdrop where, to date, most government oversight of stablecoins and the crypto sector has been relatively theoretical.”

Meanwhile, the latest PYMNTS Intelligence report “Can Blockchain Solve the Cross-Border Payments Puzzle?” argued that integrating stablecoins into a business’s payment system can give cross-border customers a fast, reliable and cost-effective alternative to traditional payment rails. Stable currencies can speed up transactions and reduce currency exchange risks, making them an attractive option for international transactions.

Also last week, the FSB said it would continue to monitor the implementation of the crypto regulations it introduced last year, both in its own jurisdictions and beyond.

“Given the particularly acute risk of regulatory arbitrage in the crypto space, broad global enforcement is crucial,” the board said.