Today the Financial Stability Board (FSB) said that many existing stablecoins wouldn’t meet its final recommendations for global stablecoin arrangements, which it plans to release this year. It made the observation in a letter about its 2023 work plan sent to the G20 and central bankers. The stablecoin recommendations include governance, redemption and effective stabilization mechanisms.
It aims to provide national regulators with guidance on regulating, supervising and overseeing global stablecoin arrangements, the ones expected to reach a massive scale. The goal is to achieve a consistent approach internationally.
The initiative was triggered by Facebook unveiling the Libra stablecoin project, which was renamed to Diem and eventually dropped when regulators blocked multiple launch avenues.
So far, the FSB has reviewed the state of regulation of stablecoins and made high level recommendations regarding global stablecoin regulation and supervision. When it published the second iteration of high level recommendations in October 2022, it stated that many current stablecoins don’t comply.
Today the FSB also mentioned plans to publish a joint report with the IMF on supervising and regulating crypto-assets, with the IMF adding a macroeconomic perspective. The FSB published high level recommendations in October 2022.
Last week the FSB released a report on decentralized finance (DeFi) in which it said DeFi amplifies the risks seen in traditional finance (TradFi). From a policy perspective, it wants to look at the on-ramps, which include stablecoins and centralized cryptocurrency exchanges.
One of the challenges for the FSB is the rapid pace of evolution in the sector. With the collapse of FTX, people are more wary of cryptocurrency exchanges, and some are shifting towards self custody. As a result, some self-hosted wallets are increasingly linking directly to fiat on-ramps.