BIS emphasized the need for global regulation of stablecoins due to regulatory fragmentation hindering their implementation.
The Bank for International Settlements (BIS) underscored the importance of global regulation of stabilized cryptocurrencies in a recent statement.
The BIS conducted a survey involving eleven different jurisdictions and found that regulatory fragmentation significantly hinders the implementation of stablecoins.
Regulatory oversight of these digital assets was deemed “urgent” by the entity under consideration. The dangers that are linked to the absence of a single regulatory framework were discussed in this document.
The fact that this fragmentation may make it more difficult for stablecoins to enter the global monetary system was brought to anyone’s attention.Different countries’ legislation hinders the use of stablecoins, despite their promising potential.
BIS Identifies Gaps in Global Stablecoin Regulation
Several countries have developed regulatory strategies that align with the situation. These standards are made up of issuer authorization reserve criteria, risk management, and anti-money laundering regulations are the components that make up these standards.
Nevertheless, there are regulatory hurdles when it comes to stablecoin issuances, and these challenges vary depending on the framework. A variety of financial services, stocks, services, and payment methods may fall under this umbrella.
This particular heterogeneity of regulations, with regard to redemption procedures and the characteristics that define a stablecoin, is equally concerning.
Some jurisdictions treat algorithmic stablecoins in the same manner as fiat-pegged ones. The United Kingdom, Singapore and Japan, on the other hand, have their own methods of regulating them.
Furthermore, a number of countries within the United Arab Emirates have established laws that prohibit their use.
BIS primarily highlights these variations due to the diverse design qualities of stablecoins and their perceived higher risk. In addition to this, the BIS paper addresses concerns regarding the regulation of stablecoins.
The study reveals that different jurisdictions have different requirements for reserve management and custodians. For example, in the United Kingdom, reserves are required to remain in a statutory trust.
The paper also discusses the mismatch in audit and liquidity requirements across different areas. People have observed a greater degree of consistency in the technological and security guidelines.
The Bank for International Settlements (BIS) advocates for further research to explore the interactions between stablecoins and other digital assets, including tokenized funds and electronic currencies issued by central banks.
Such study is essential to get a thorough understanding of the potential impact that stablecoins could have on the global monetary system.
After the Bank of International Settlements (BIS) issued prior suggestions for stablecoin regulation in February, the demand for harmonized regulation has emerged. The Global Monetary Fund and the Financial Stability Board share the same stance as the Bank for International Settlements (BIS).
John Deaton, an attorney who advocates for cryptocurrency, has made statements that highlight the industry’s perspective on the regulation of stablecoins. Deaton noted Senator Elizabeth Warren’s apprehensive stance about the introduction of stablecoins into the financial sector.
According to Warren, there was a problem with threats to both national security and security. As she stated, new rules have the potential to make these hazards much more severe.