According to a recent report from the Bank of International Settlements (BIS) and G7, Bitcoin and other initial cryptocurrencies have struggled to establish themselves as an enticing mode of payments or as a store of value. BIS and G7 state global stablecoins are a threat to monetary policies.
However, both the organizations in their October report contended that the global acceptance of asset-linked cryptocurrencies, also known as Stablecoins, like Libra, is a threat to financial policies, market stability, and competitions.
The groups further contended that Stablecoins, identified as “Global Stablecoins” in the report are widely adopted and can target the global audience with “serious detrimental effects,” on the present economic system.
However, “first-generation cryptocurrencies like bitcoin have faced, amongst other obstacles, extremely unpredictable rates, constraints on optimization, challenging architectures, and privacy and compliance concerns. Therefore, for certain traders and those engaged in illegal activities, crypto assets have emerged more of a highly volatile asset class than as payment options.”
Stablecoin categorization, identified as identical to cash, statutory or asset assertion, or the privilege for an asset lender, could remain relatively the biggest regulatory concern in the current situation, as mentioned in the report. Moreover, there seems to be no comprehensive understanding of the impact of Stablecoin on existing cash networks, like wire transfers.
While Stablecoins can make payments speedier, better valued and more equitable, they can only “get to grips with considerable risks.”
In an appendix, the report of the G7 indicates that the governance of the Libra Association by the Swiss Financial Market Supervisory Authority (FINMA), which is within its authority in Geneva coincides with the G7 guidelines of Stablecoin.
FINMA has once again pointed out the need for international cohesion and “acceptable corporate governance standards” for all payment system services.
At the behest of the G7 in July, shortly after the release of the Libra in June, the Stablecoins report was compiled. Clearly, the report only described Libra in one paragraph, albeit partly geared towards the plan.
In reply to the G7, a statement was released on Friday by the Libra Association that the Stablecoin is “unwilling to change the central banker’s position and power” and that:
“Wallets and other financial services operating on the Libra Network (including exchanges and other on and off ramps) will have to comply with regulations, such as local capital controls, which can be tailored to prevent large scale flights from the local currency to Libra coins in emerging markets.”