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Many existing stability measures would not address the "high-level" recommendations that will soon be established by international standardisation bodies such as the Financial Stability Board (FSB), said its chairman Klaas Knot on Monday.
The FSB’s upcoming guidance targets the strengthening of stablecoin governance frameworks, redemption rights and stabilization mechanisms, Knot said in a letter to G20 finance ministers and central bank governors.
According to its 2023 workplan released on Monday, the fsb is ready to finalize its recommendations for crypto regulation and stableoins by July. Stablecoins are cryptocurrencies associated with the value of other assets such as the US dollar or the euro.
Regulatory agencies around the world have taken action to monitor payments-based settlements, most of which are backed by fiduciary foreign currency reserves in cash equivalents – or more sadly by short-term unsecured debt. While stablecoin issuers have made efforts to cut private debt out of their reserves and improve transparency, Knot’s message indicates these measures may not be enough.
In its letter, Knot further stated that many existing standards would also not be consistent with international standards established by payments or securities standards bodies.
In February 2022, the FSB warned that crypto risks to financial stability “could rapidly escalate.” Regulators around the world, including the FSB, have been increasing efforts to oversee the sector following last year’s many company collapses – including token issuer Terracrypto exchange FTX.
Last week, the fsb stated that it will work with other standards bodies to determine how decentralised finance (challenge) should be regulated. He is also preparing a document with the International Monetary Fund (IMF) on crypto regulatory issues.
