Financial Stability Board(FSB) warned, citing that stablecoins are not stable.
The Financial Stability Board, which consists of financial regulators in G20 countries, including Turkey, conducted a research on stablecoins. The research, which is associated with the collapse of the algorithmic stablecoin Terra, discussed the structure of stablecoins.
Financial Stability Board: Stablecoins Are Not Stable
In a report published by the Financial Stability Board (FSB), it was stated that stablecoins do not meet certain standards.
The FSB said that currently no stablecoins meet the standards for the digital asset category set by central banks around the world. Also, according to the FSB, many stablecoins lack mechanisms to support the promise of price stability.
Warning that stablecoins are not stable, the FSB is skeptical about how most stablecoins can maintain their prices under market stress. The Board recommends that rules similar to those banks currently need to follow apply to stablecoins, an approach discussed by the US Congress.
FSBHere’s what stablecoins say unequivocally:
“Most stablecoins allow arbitrage activities of market participants and rely heavily on them. It is unclear how this will continue. It raises questions about the effectiveness of stabilization mechanisms in supporting a stable price at all times under adverse financial conditions.”
The FSB’s comment period for crypto-asset regulations will be open until December 15, and the organization plans to issue comprehensive final recommendations by mid-2023.
