Crypto and stablecoin regulations are set to be released in July 2023 by the international standard setter.
Klaas Knot, chair of the Financial Stability Board (FSB), said many stablecoins do not meet the “high-level” recommendations soon to be set by global standard setters.
According to Knot, the FSB’s upcoming guidance will strengthen stablecoin governance frameworks, redemption rights, and stabilization mechanisms. G20 letter.
By July, the FSB plans to publish its recommendations for regulating crypto and stablecoins. Stablecoins are cryptocurrencies pegged to currencies like the dollar or euro.
Most stablecoins that focus on payments are backed by fiat currency reserves in the form of cash equivalents or, more infamously, by unsecured short-term debt, as outlined by regulators around the world. In spite of the fact that stablecoin issuers have taken steps to reduce private debt out of their reserves and improve transparency, Knot’s message indicates these measures are not enough.
Knot noted that many existing stablecoins would also fail to meet international standards set by standard-setters for payments and securities.
After last year’s numerous company collapses – including Terra token issuer and crypto exchange FTX – the FSB warned in February 2022 that crypto risks could rapidly escalate. Regulators around the world, including the FSB, are increasing their efforts to oversee the sector.
In addition to working with other standard-setting bodies, the FSB plans to write a paper with the International Monetary Fund (IMF) on crypto regulation issues.