Central Banks recommend that proposals like social media giant Facebook’s planned stablecoins Libra must have a more common regulatory framework before it launches, to ensure its stability.
The proposed cryptocurrency Libra and the possibilities of a currency-backed stablecoin being accessed by people through a platform like Facebook have spurred the central banks to frame regulations and to deepen their researches on how they can launch their digital currency.
The Financial Stability Board (FSB) clarified in a statement that the current national rules are not capable enough to regulate cryptocurrencies adding that the government should ensure that global stablecoins are fully accountable, data is stored safely, have effective protection against cyber attacks and money laundering.
It has been ensured by FSB that appropriate actions will be taken to enforce proper guidance to reduce regulatory gaps that could diminish financial stability, by adhering to all applicable regulatory standards, addressing risks to financial stability before beginning operation and bringing in new regulations as required.
In April this year, the FSB, which includes central banks and financial regulators from the Group of 20 Economies (G20) issued a comprehensive study on cryptocurrency presenting 10 recommendations to regulate them effectively and pointed out that stable coins could bring efficiencies to cross-border retail payments, which tend to be slow and expensive.
“A widely adopted stable coin with a potential reach and use across multiple jurisdictions could become systemically important. Authorities agree on the need to apply supervisory and oversight capabilities and practices under the ‘same business, same risk, same rules’ principle,” the FSB said in a report to G20 finance ministers.
Meanwhile, the G20 members, the International Monetary Fund (IMF), the World Bank and the Bank for International settlements have released a report in which it states that by the end of 2022 they will complete regulatory framework, research, selection of CBDC (Central Bank Digital Currency) designs, technologies and experiments.
Regulators for bank capital and anti-money laundering will submit their report by December 2021 on whether regulation changes are necessary. A review on how stablecoins have to be regulated will be issued by July 2023, the FSB added.