The Bank for International Settlements says coordinated international efforts are necessary for stablecoin regulation.
According to a new BIS release from the organization’s Committee on Payments and Market Infrastructures (CPMI), stablecoin technology presents both new financial opportunities and challenges, but its downsides may outweigh its benefits.
Says the report,
“The use of stablecoins in cross-border payments could provide opportunities (in terms of increasing speed and reducing costs, as well as expanding the range of options and improving transparency). At the same time, challenges may include coordination, competition, network scale and market structure, and the lack of internationally consistent and effective regulation, supervision and supervision.
Even a PDR SA (Personal Data Request Service Agreement) does not necessarily have a positive impact on cross-border payments, as the disadvantages may outweigh the potential advantages.”
According to the BIS, standard regulation of stablecoin servicing agreements (SAs) may not be sufficient, and that “improvements in existing payment infrastructures or the development of CBDCs (central bank digital currencies)” can be explored instead.
BIS says coordinated international efforts are necessary to prevent the regulatory arbitrage of stablecoin technology.
“Highly coordinated efforts at the international level are needed to prevent regulatory arbitrage while allowing sufficient flexibility so that jurisdiction-specific risks and concerns are addressed.
Given the significant risks posed by EMDEs in the form of currency substitution and the potential loss of seigniorage, additional attention could be paid to steps (including the possibility of limiting or banning the use of SAs) to reduce the risks to the national payment and monetary system. as well as on financial stability, with authorities identifying that the use of SAs could disrupt the central bank’s mandate for monetary and financial stability.”
In early October, the BIS and three central banks completed a cross-border trading experiment using central bank digital currencies (CBDCs) and decentralized finance technology (DeFi).
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