Financial stability Board focuses on CBDC

The financial stability Board (FSB) published two documents related to the digital currency in preparation for the G20 in late November.

New recommendations for stable coins

The first document on global stable currencies, entitled “Regulation and supervision of global stablecoin agreements”, sets out high-level recommendations for the regulation, supervision and control of global stablecoin mechanisms (GSC).

The second section examines cross-border payments and sets out a broad schedule for studying Central Bank digital currencies (CBDC) for cross-border purposes. It is noteworthy that two articles about GSC managed to avoid mentioning Weights.

The scheme of the first report, unfortunately, uses the FATF’s penchant for the terminology “so-called stablecoins”, and the following ambiguous definition:

“The so-called ‘stablecoins’ are a special category of crypto assets that can improve the efficiency of financial services, but can also pose risks to financial stability, especially if they are used on a large scale”.

New rules that have become even stricter

Of course, this would not be a government report, without a detailed list of the alleged risks of implementing CBDC. The document identifies issues for financial stability: consumer and investor protection, privacy and data protection, anti-money laundering (AML), tax evasion, fair competition and antitrust policy, market integrity, sound and efficient management, cybersecurity and other operational risks, and payment system security as key risks.

The key result of the first statement is a set of ten recommendations for the GSC, which largely reflects the recommendations previously published by the FSB in the consultation documentation in April 2020.

The recommendations are that the GSC:

• should be fully regulated and monitored;
• should be regulated in proportion to the risks;
• should be regulated at the international level through the coordination of jurisdictions to prevent gaps in oversight;
• have a comprehensive management structure that defines accountability;
• have effective risk management for reserves, operational resilience, cybersecurity, AML/CFT;
• have reliable systems for data protection, management, and storage;
• have recovery plans;
• to provide transparent information about the functions, including any mechanism of stabilization;
• provide legal clarity on the possibility of compulsory purchase of rights;

also, comply with all regulatory and supervisory requirements of any jurisdiction before starting work.

It’s hard to see that the recommendations above are anything other than General statements of acceptance and laudable goals that few can disagree with. But the real problem is how much detailed regulation will help achieve this without stifling innovation and new business.

The second recommendations focus less on the GSC in particular, and the CBDC in General, and focus on the more General goal of increasing cross-border payments.

Time will tell, of course. Meanwhile, RippleNet continues to move forward, using real blockchains to make international payments faster and cheaper, while meeting its obligations.