The G7 task force has finally released its report. The latter highlights the shortcomings in the prevailing cross- border payment systems. However, the force is still wary if stablecoins will be able to resolve the same owing to their operational challenges.
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The report alleges that the adoption of global stablecoins is uncertain and the same will challenge the financial stability and the international monetary system. Also, regardless of their size, they will pose risks to anti-money laundering efforts across states and will hinder tax compliance and consumer data protection.
Furthermore, the task force alleges that the G7 nations will not allow any launch of a stablecoin without first ensuring the challenges and risks. The report first despised the cryptocurrencies and said that they have failed to provide an attractive means of payment or store of value. While the task force did consider stablecoins as a means of payment or store of value, the former considers that the cons outweigh the pros. Per the report, that the launch of the same will be a threat to the global financial stability and monetary system.
The report further says that central banks, standard-setting bodies such as CPMI should keep up with their efforts to promote faster and low-cost payment systems. Moreover, issuance of stablecoins will include governance, management entities and underlying technologies such as DLT, smart contracts or conventional FMI technology such as bank accounts.
The report mentions,
Governance plays a key role in stabilization because a central agent or group of agents must design, and set rules for, how the value of the stablecoin will be stabilized. For example, a governmental agency must set the rules that asset managers or stablecoin issuers should follow in order to ensure that any stability target is maintained.
The report further elaborated on the role of management entities on the issuance of stablecoins
Management entities also play a key role in the issuance and stabilization of stablecoins. They manage the issuance and redemption of the stablecoin, the stability of the stablecoin, or the custody of reference assets according to the rules designed by the governance layer. Management entities can also include custodians that hold reference assets, such as fiat currencies, commodities, and other financial assets. In addition, management entities could comprise a stablecoin mint that issues new stablecoins.
While stablecoins may eventually solve the same as owing to their technological prowess, there is no guarantee that the public sector and the regulators will finally put stablecoins to use as a store of value and use it as a payment system. The report seems to agree with the Financial Action Task Force(FATF). However, the FATF still shows some relaxation and is willing to approve certain new crypto-based payment systems.
Yesterday, European Central Bank Director, Benoit Coeure claimed that Global financial regulators have no plans to ban Facebook’s Libra or other stablecoins. However, digital currency projects will have to meet the highest regulatory standards. He said,
In the case of Europe, neither the Commission nor the ECB intends to make Europe a no-fly zone for stablecoins. But stablecoins will have to meet the highest regulatory standards and adhere to broader public policy goals,”
Will stablecoins eventually get their rightful place in the economy, or will they vanish into oblivion, owing to regulatory issues? Let us know, what you think in the comments below!