A Financial Stability Board (FSB) revealed that stablecoins, or cryptocurrencies tied to real-world assets, are currently not widely used for traditional payments.
The finding was mentioned on Wednesday in a progress report from the FSB for improving cross-border payments. The FSB has published its first targets for the improvement of cross-border payments in October of last year. Wednesday’s progress report acknowledged that the market capitalization of existing stablecoins has continued to grow over the past two years and that stablecoins could help facilitate better cross-border payments.
The FSB is an entity funded by the Bank for International Settlements that contributes to the global financial system. It is currently chaired by Federal Reserve Vice Chairman Randal Quarles.
Overall, stablecoin issuers minted more than $ 133 billion in tokens, according to CoinGecko.
“From a policy perspective, it is useful to assess whether and how the use of well-designed global tools [stablecoins] could improve cross-border payments. An action to this extent has been added, ”the report says.
Big players in cross-border payments, like MoneyGram, are already looking to use private stablecoins like USDC to speed up cross-border transactions, and regulators are getting nervous.
The FSB roadmap is just the latest institutional document to examine the role of private stablecoins in cross-border transactions and how they should be regulated. Last week, the BIS released guidelines on how international payments laws might be applied to stablecoins.
Meanwhile, global financial institutions are encouraging central banks to explore CBDCs. The Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the World Bank (WB) have said central banks should consider the cross-border implications of CBDCs. Last month, Benoit Coeuré, head of the BIS Innovation Hub, signaled that central banks should step up work on CBDCs in light of stable coins.
“CBDCs will take years to deploy, while the stablecoins and crypto assets are already here. This makes the start-up even more urgent, ”said Cœuré.
The FSB’s roadmap also indicates that the implementation of stable regulations in its member jurisdictions is still at a very early stage and countries are considering various approaches. Jurisdictional authorities have identified several issues that could hamper the formulation of “concrete recommendations,” including repurchase rights, portfolio providers and the management of stable reserve assets, according to the report.
“As a next step, the FSB will examine, in consultation with other [standard-setting bodies] and international organizations, the high-level recommendations of the FSB and how the identified gaps could be filled by the existing frameworks, and update the recommendations if necessary, by July 2023, ”the report said.
The roadmap also refers to the latest research and studies in CBDCs, and how they could help improve cross-border payments. A recent BRI study concluded that CBDCs could potentially reduce costs and delays in processing cross-border settlements.
The FSB roadmap indicates that the IMF and WB should be ready to provide technical assistance on how to facilitate cross-border use of CBDCs if requested as early as July 2022.