The Financial Stability Board (FSB) has revealed that many stablecoins will not meet the standards set out in its cryptoasset regulatory recommendations due to be released later this year. The regulator noted that the proposals were aimed at maintaining an effective "stabilization" mechanism and strengthening redemption rights.
The FSB is a global organization that oversees and provides guidance on the stability and resilience of the international financial system. The regulator was created by G20 countries to replace the 2009 Financial Stability Forum following the 2008 financial crisis. According to an official document published on Monday, the FSB believes that stricter regulation is essential for the crypto industry, given the plethora of scandals that rocked the industry last year.
The regulatory work is in line with last year’s announcement that the FSB intends to set a timetable for global crypto regulators in 2023. The proposals aim to reduce the impact of a crypto-asset implosion on the wider financial system.
A core aspect of the regulatory framework is the focus on stablecoins. And the collapse of the $40 billion Terra-Luna ecosystem in May has damaged the reputation of such assets. The FSB now seeks to strengthen the global governance framework for stablecoins, given the characteristics of such assets that could exacerbate threats to financial stability.
Although the recommendations have yet to be released, the FSB has concluded that many existing stablecoins do not meet the required “high level” standards, let alone the detailed rules set by the sectoral body. Additionally, the FSB intends to publish a joint paper with the International Monetary Fund (IMF) to synthesize findings on crypto-asset policy.
Once the work is complete, the FSB will coordinate the regulation of cryptocurrencies according to the principle of "same activity, same risk, same regulation".
