The Facebook‘s Libra, a cryptocurrency system planned out by the giant social network came under a severe scrutiny last year after the company had issues with privacy and handling of users’ data especially with the case of the Cambridge Analytica.
This prompts the need for the world leading economies to make rules in order to avoid the digital currency from undermining financial stability.
Stablecoin as we all know are used for storing assets or used for storing values as are tied to traditional currency or basket of assets. And with that, the G20’s Financial Stability Board or FSB did make some recommendations on Tuesday for a common, international approach to regulating stablecoins which is coming to limelight and thanks to Facebook proposing it’s Libra stabblecoin.
They should face the same rules as other businesses that present the same risks, regardless of technology used, it said.
So in order for this system to work out, Stablecoins have to still adhere to existing financial rules for payment such as checks which will apply in whole or in part to stablecoins as well as address some of the risks this system may generate along the line.
Meanwhile the coverage of this system can be patchy depending on country which can then expose gaps for those supervising a cross-border stablecoin according to the FSB.
So a flexible recommendation was proposed to better ease out cross-border cooperation in order to avoid a stablecoin playing off one jurisdiction right against one another.
The recommendations propose flexible, cross-border cooperation to avoid a stablecoin playing off one jurisdiction against another.
“Relevant authorities should, where necessary, clarify regulatory powers and address potential gaps in their domestic frameworks to adequately address risks posed by global stablecoins,” the FSB said.
Also stablecoin operators must also make efforts to effectively manage risks as well being operationally resilient, have safeguards up against cyber attacks as well as stopping money laundering and terrorist financing.
Libra which had big companies such as Visa, Mastercard and PayPal right behind it had since dropped their support for the platform over skepticism from regulators as well as central banks which said it must not be launched until adequate rules are set in place.
Meanwhile the social media giant did announce last month that it was still planning to offer the Libra token but was also working on the digital versions of government-backed currencies.
The Switzerland-based Libra, which will issue and govern the digital currency, has said that it welcomes the regulatory scrutiny. It declined to comment further.
Central banks are also looking into the possibility of issuing their own digital currencies as the use of cash for payments declines. The threat to their control over money posed by Libra’s potential launch has been a major factor in accelerating research efforts.
Meanwhile other stablecoins which still exists are available internationally while still having a quite small scale and therefore pose no financial risks as well as stability but as time gets by, they could also get a rise.
The largest, Tether, with a market capitalisation of around $6.3 billion, it still a fraction of the size of bitcoin. It is little used beyond the world of cryptocurrency trading.
The FSB’s public consultation is open until July 15, with a final report published in October.