Daily Management Review

Central Banks Agree To Create Rules For Regulating Stablecoins Like Facebook's Libra


Central Banks Agree To Create Rules For Regulating Stablecoins Like Facebook's Libra
Central banks of the world have agreed to set out rules and regulations for monitoring and regulating cross-border stablecoins such as the one planned by the social media company Facebook called Libra.
The central banks on Tuesday agreed to make new rules that will have a common approach and said more rules may later be needed for regulation of such digital coins in to ensure there is stability in the financial markets.
Central banks have been pushed to come together to put in place rules and closely and seriously consider whether central banks can also launch their own digital currency by the prospect of billions of people on Facebook choosing to use a stablecoin that is backed by currency/
The Financial Stability Board (FSB) said in a statement regulation of stablecoins are not completely covered by the existing national rules and therefore it is vitally important for regulators to ensure that global stablecoins are fully accountable and companies launching such coins keep data safe. They also said that such coins should also have efficient and effective safeguards to prevent loss from cyber attacks and money laundering for criminal purposes.
“Appropriate actions” would be taken by it so that they are able to ensure that there is implementation of the guidance that can help avoid regulatory gaps that could be used to put financial stability in threat, the FSB said. It added that this could be achieved by adhering to all applicable regulatory standards, addressing risks to financial stability prior to launching of operations of such coins and adapting to the new regulatory requirements as necessary.
The FSB is a group that has as its members central banks and financial regulators from the Group of 20 Economies (G20). In April, a a draft version of its recommendations had been put forward by the group for public consultation.
On Tuesday, the FSB said that efficiencies to cross-border retail payments could be brought about by stablecoins and increase speed and reduce costs of cross-border retail payments.
“A widely adopted stablecoin with a potential reach and use across multiple jurisdictions could become systemically important,” the FSB said in a report to G20 finance ministers.
“Authorities agree on the need to apply supervisory and oversight capabilities and practices under the 'same business, same risk, same rules' principle,” it said.
What, if any, changes in rules are needed will be reported by December of 2021 by regulators for bank capital and anti-money laundering. The FSB added a review of how stablecoins are being regulated will be completed by July 2023.