US Financial Authority Will Join New Rules For Stablecoins

The US is preparing a new stablecoin regulation. (Photo; Doc. Cryptoast)

JAKARTA - The Financial Stability Board (FSB) is predicted to launch a new rule for cryptocurrencies, especially for stablecoins, in July 2023. However, the head of the FSB, Klaas Kunt, has called for caution in his letter to the G20 finance ministers and central bank governors. Knot warned that many existing stablecoins may not meet the "high-level" recommendations outlined in the upcoming guidance.

In the upcoming guidelines, the FSB will focus on stablecoin governance, rights to redeem, and stabilization mechanisms. Stablecoins are cryptocurrencies held on to other asset values, such as the US dollar or euro. However, many stablecoins are not backed by fiat currency reserves in cash equivalent form or, more notably, by non-secured short-term debt.

The FSB has warned of the risks posed by crypto against financial stability before. Therefore, regulators around the world have increased scrutiny of the sector after the collapse of several companies. The FSB hopes that future guidance can help prevent similar incidents from happening in the future.

The FSB will also coordinate with other standard setting agencies to regulate DeFi and will publish a paper on regulatory issues related to crypto. The FBS hopes this paper will help guide stablecoin transparency.

While stablecoin publishers have tried to increase transparency and reduce personal debt in their reserves, Kunt suggests that these measures may not be enough. Pint stressed that many existing stablecoins would not meet international norms set by payment standards or securities.

Knot stated that it is very important for the stablecoin industry to realize the importance of meeting international regulatory standards. With the FSB recommendation, stablecoin publishers should prioritize strengthening the governance framework, rights to redeem, and stabilization mechanisms. Stablecoin publishers should pay attention to future guidelines from the FSB so that they can comply with international standards and minimize the risks posed by cryptocurrencies.