G20 leaders are stumped by the prospect of “global stablecoins.”
The Financial Services Board, a committee set up by the G20, wrote in a letter to leaders Monday that fiat-pegged digital currencies could “pose a host of challenges to the regulatory community.”
Those challenges include financial stability, consumer protection, anti-money laundering and terrorism financing provisions, cyber security and tax evasion, the G20 committee said. The FSB has set up a working group to examine these regulatory issues.
The letter comes in response to the growing interest in “central bank digital currencies” backed by sovereign currencies. Digital currencies have already been proposed by China, Britain, Sweden, and Facebook, whose embattled “Libra” currency has faced widespread pushback from regulators.
The threats posed by such currencies have been exaggerated, the FSB said, and they have the potential to “become systemically important, including through the substitution of domestic currencies.”
Last week the Bank of England made similar remarks, playing down the dangers of technology while advocating caution. Digital currencies will “need to meet the highest standards of resilience and be subject to appropriate supervisory oversight,” the bank said.
A draft of a G7 report, meanwhile, warned that “no stable no project should begin operation until the legal, regulatory and oversight challenges are adequately addressed.”