BIS Calls for Coordinated International Efforts in Stablecoin Regulation
The Bank for International Settlements (BIS) emphasizes the importance of coordinated international efforts to regulate stablecoins. In a recent release from the BIS Committee on Payments and Market Infrastructures (CPMI), the organization acknowledges that stablecoin technology presents both opportunities and challenges, but cautions that the drawbacks may outweigh the benefits.
The report highlights that while stablecoins could enhance cross-border payments by increasing speed, reducing costs, expanding options, and improving transparency, there are challenges to consider. These include coordination, competition, network scale, market structure, and the lack of consistent and effective international regulation.
The BIS suggests that standard regulation of stablecoin service agreements (SAs) may not be sufficient. Instead, it proposes exploring improvements to existing payment infrastructures or the development of central bank digital currencies (CBDCs) as potential alternatives.
To prevent regulatory arbitrage of stablecoin technology, the BIS emphasizes the need for strongly coordinated international efforts. It also acknowledges the risks faced by emerging market and developing economies (EMDEs), such as currency substitution and potential loss of seigniorage. Authorities may consider steps to mitigate these risks, including limiting or prohibiting the use of SAs if they interfere with central bank mandates for monetary and financial stability.
Hot Take: Coordinated Global Approach Essential for Stablecoin Regulation
The Bank for International Settlements (BIS) highlights the necessity for coordinated international efforts in regulating stablecoins. While stablecoin technology offers advantages in cross-border payments, such as increased speed and reduced costs, challenges remain concerning coordination, competition, and regulation. The BIS suggests exploring improvements to existing payment infrastructures or developing central bank digital currencies (CBDCs) instead of relying solely on standard regulation. To prevent regulatory arbitrage, a unified approach is crucial. Additionally, emerging market and developing economies face risks like currency substitution and loss of seigniorage, requiring measures to protect national payment systems and financial stability. Coordinated international efforts are essential to address these concerns effectively.
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