A recent publication by the Financial Stability Institute has raised concerns about the necessity of establishing uniform regulatory frameworks for stablecoins worldwide.
The report, a joint effort between the Bank for International Settlements (BIS) and the Basel Committee on Banking Supervision, highlights the crucial role of consistent regulations in strengthening the global financial system.
“Stablecoins may still face varying levels of regulation or even remain unregulated in certain jurisdictions,” the report stated.
Authored by FSI Deputy Chair Juan Carlos Crisanto and Senior Advisors Johannes Ehrentraud and Denise Garcia Ocampo, the document emphasizes that while there are common regulatory themes, differences arise from the unique designs and perceived risks associated with stablecoins. This fragmentation could pose a challenge to financial stability on a global scale.
Countries have been struggling with the regulation of stablecoins for years. The U.K. recently recognized stablecoins as a legitimate payment method in 2023, while the European Union implemented the Markets in Crypto Assets (MiCA) regulation to oversee stablecoin activities.
Japan has also introduced its own set of regulations, and the U.S. is considering similar legislative measures. The FSI’s research reveals discrepancies in stablecoin definitions, categorizations, and reserve asset disclosure requirements by issuers, which could potentially jeopardize financial stability.
The report advocates for a globally consistent regulatory approach to manage risks, prevent regulatory arbitrage, and ensure fairness in the digital asset space. It also stresses the importance of ensuring that stablecoins are compatible with central bank digital currencies (CBDCs) and other digital assets to promote a unified financial ecosystem.
International organizations such as the International Monetary Fund and the Financial Stability Board have echoed the need for global standards to establish universal norms for stablecoins.
For more information, please refer to the BIS recommendations for global stablecoin regulation.