On Tuesday, in a significant development, central banks have said, they are set to regulate cross-border stablecoins, including Facebook’s Libra, with a common approach; they also mentioned that more rules may be introduced later to ensure market stability.
The prospect of a currency-backed stablecoin being used by billions of people on Facebook has galvanized central banks into creating rules to govern and even launch their own respective digital currencies.
In a statement, the Financial Stability Board (FSB) said, existing national rules do not fully cover stablecoins; regulators will have to ensure that global stablecoins are fully accountable, keeping in mind data safety and effective safeguards against cyber attacks and money laundering.
The FSB said it will take “appropriate actions” to ensure implementation of its guidelines so as to avoid regulatory gaps which can be exploited and undermine financial stability. The implementation of the guidelines will have to adhere to all applicable regulatory standards, mitigate risks to financial stability before commencing operation, and be flexible enough to adapt to new regulatory requirements, as and when necessary.
The FSB, which comprises of central banks and financial regulators from the Group of 20 Economies (G20), had placed a draft version of its recommendations for public consultation in April 2020 wherein it had said, stablecoins could bring efficiencies to cross-border retail payments, which tend to be slow and expensive.
“A widely adopted stablecoin with a potential reach and use across multiple jurisdictions could become systemically important,” said the FSB in a report to G20 finance ministers. “Authorities agree on the need to apply supervisory and oversight capabilities and practices under the ‘same business, same risk, same rules’ principle”.
Regulators who oversee money laundering activities as well as those who oversee banks are scheduled to provide a feedback to the FSB by December 2021 on whether any changes in rules are required.
A review on the regulations of stablecoins is scheduled to be completed by July 2023, said the FSB.