Almost 50 global organizations recently participated in a survey. There are questions about the impact of stablecoins on financial stability.
For three months, the Financial Stability Council (FSB) gauged the opinion of almost 50 organizations, banks, and Bitcoin companies on global stablecoins (GSC) and their possible adoption. In recent days, the international agency published the responses that it received to its 12-question questionnaire related to regulatory and oversight challenges.
Among the participants, BBVA, BNP Paribas, Circle, Coinbase, the Libra Association, NGO Bitcoin Argentina, Paxos, Canadian, and Japanese bankers associations, the Crypto Valley Association, and the Global Association of Financial Markets were the most prominent. The results show that there are different points of view on the operation of global stablecoins.
In the case of the Spanish bank BBVA, their questioning revolved around the concept of stablecoins. The institution considers that the definition would be “very broad” since an asset that seeks to maintain a stable value could cover a wide range of activities, some of which are already regulated.
Regarding the terminology of stablecoins for their “global availability,” the bank noted that the term is misleading as all stablecoins may be available worldwide, at least technically. Furthermore, BBVA stated that financial stability would be at risk if a payment system based on this type of currency were to function.
In the case of NGO Bitcoin Argentina, the organization highlighted the 10 recommendations that the FSB issued in April of this year, before the global consultation. After analyzing what the supervisory authority said, the entity differentiated stablecoins according to whether or not there may be assets in reserve and whether or not there may be rights with the issuer.
“If the reserve assets are a ‘fiat currency’ and there is a direct claim on the assets, then the ‘stable currency’ is electronic money,” said the NGO. The organization also said that no one should consider decentralized stablecoins as electronic money or securities and that they should enter into the category of cryptocurrencies.
Stablecoins and Its Scopes
The establishment of agreements on stablecoins could compromise the Libra Association. Some of the risks are commercial effects on banks due to bank disintermediation, the ability to apply capital controls, financial stability, the establishment of effective anti-money laundering frameworks, and adequate management of reserves.
Stablecoin promoters led by Facebook consider that stable currency systems may coexist and compete with other types of crypto assets and existing payment systems. Regarding global stable currency projects and that of central banks, Libra said that an interface between the two can help eliminate or at least mitigate the risks of instability.
Companies in the cryptocurrency ecosystem see potential GSC adoption and global reach. According to Circle and Coinbase, it is possible to demonstrate the use that global stablecoins would have in multiple jurisdictions and many sectors of the industry. However, the nature of the stabilization mechanism and the liquidity of stablecoins need to be considered.
By Alexander Salazar
