Here is our pick of the 3 most important Stablecoin news stories during the week.
Here come the Regulators!
After the failure in recent weeks of an Algo stablecoin (Terra) the Regulators have now got some red meat to stick their teeth into and propose sweeping regulations of the entire industry and this week they pounced.
First, BIS led with concerns about a “shadow” financial system that could severely impact the existing Banks who are disadvantaged by not having a level playing field (I’m not making this up).
“This “shadow crypto financial system” serves both retail and institutional clients, such as dedicated investment funds. An uneven regulatory treatment across banks and crypto exchanges and significant data gaps suggest that a proactive, holistic and forward-looking approach to regulating and overseeing cryptocurrency markets is needed. It should focus on ensuring a more level playing field with regard to financial services provided by established financial institutions and intermediaries in the emerging crypto shadow financial system by introducing more stringent regulatory and supervisory oversight for the latter.”
However, they then go onto admit that traditional Financial Institutions barely touch the stuff with total exposures of $188 million in 2021. There are multiple individual Crypto Whales with substantially more exposure.
Then followed the G7 “In particular, the G7 calls for rapid implementation of the Financial Action Task Force (FATF) ‘travel rule’ and stronger disclosure and regulatory reporting, for instance, as regards reserve assets backing stablecoins”
So in summary, this week regulators grasped the opportunity to promote themselves as the solution and politicians were busy signalling that they were responding to popular demand.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years. Twitter @Alan_SmartMoney
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