14 Apr 2020 Arjun Agarwal
G20 Discusses New Stablecoin Rules Ahead Of Libra's Launch
The Group of 20 (G20) announced that the world's leading economies have to come up with further regulations to help financial stability and avoid digital currencies like Facebook's Libra to cause economic havoc.
Stablecoins differ from traditional cryptocurrencies, as they are tied to one or more specific fiat currencies, which aid the stability in the cost per stablecoin. Many stablecoin projects are used for payment provision, as well as a value storage.
Facebook's Libra stablecoin project caused regulatory havoc among global economies. The Financial Stability Board (FSB) of G20 announced ten recommendations for a comprehensive regulatory framework for stablecoins, mainly due to the pressure from Facebook's Libra project.
"Stablecoins must face the same regulations as other high-risk businesses, without taking into consideration the technology behind the project," G20's statement said.
One of the biggest concerns for the G20 nowadays is that regulations are not consistent across different countries, and this may impose regulatory gaps in various jurisdictions.
"Regulatory bodies should, where applicable, develop clear regulations to close any gaps and minimize the risks stablecoins impose on economies," the FSB stated.
However, some of Libra's most significant backers, including Mastercard, Visa, and PayPal, dropped out of support for the stablecoin, due to skepticism and not having clear regulations, which may cause the project to undergo massive delays.
Facebook's vast reach in cross-border payments and instant money transfers set the social media giant as a direct competitor to central banks, which may shift the paradigm of traditional finance.
Despite the regulatory uncertainty, Facebook considers developing digital representations of government-issued currencies, apart from the Libra project.
Some of the central banks, on the other hand, are also developing digital versions of their domestic currencies, as the use of fiat cash decreased. China, for example, tries to get a head start in the field of central bank digital currencies (CBDCs).
Meanwhile, existing stablecoin projects, despite being cited as a gateway to the world of cryptocurrencies, are still comparably low as opposed to the effect Facebook's project may have. Tether, for example, with a market cap of $6,3 billion, still sits small compared to Bitcoin.Cryptocurrency Regulations Cryptocurrency Crypto Market stable coin crypto G20 cryptocurrencies market economy Stablecoin Markets Regulation Stablecoins Regulations Facebook Libra