Global leaders have come together to create universal rules and standards for the ever-evolving crypto sector. Despite reaching a consensus on most aspects, advanced and emerging economies are witnessing a divergence in the treatment of stablecoins.
While the Group of Seven (G-7) advanced economies seem more favorable to allowing and regulating stablecoins, emerging economies within the Group of 20 (G-20) are voicing concerns for stricter restrictions or even outright prohibitions. The fear is that widespread stablecoin usage could jeopardize monetary policy in these jurisdictions.
Disagreements between the two camps could potentially hinder the global acceptance of stablecoin norms or fragment the unified oversight that financial regulators aim to achieve. Nonetheless, countries can exercise some flexibility in implementing the Financial Stability Board’s (FSB) standards according to their varying needs.
Despite acknowledging that the introduction of crypto assets or stablecoins may not adversely impact the macro economy or monetary policy in countries like the U.S., Euro area, or Japan, Toshiyuki Miyoshi, deputy director-general of the Supervision Bureau at Japan’s Financial Services Agency, believes that the implications are much more significant in emerging markets. Advanced economies seem relatively unfazed, but emerging economies have major concerns regarding stablecoin regulation, according to a senior G-20 official.
This disagreement comes to the forefront following the collapse of the terraUSD stablecoin in May 2022, which eliminated nearly $60 billion from the markets. Both G-7 and G-20 nations are committed to globally coordinating crypto norms, with Japan and India currently holding the G-7 and G-20 presidencies, respectively.
These groups rely on global standard-setters like the International Monetary Fund (IMF), the FSB, and the Financial Action Task Force (FATF) for recommendations and rules for the crypto sector. While they both pledge to implement FATF’s anti-money laundering rules for crypto, they have displayed differences in how they treat stablecoins.
Emerging economies are alarmed by stablecoins due to their potential impact on the effectiveness of monetary policy, according to Miyoshi. For instance, if USD-denominated stablecoins were introduced and circulated within small emerging markets, it could weaken their monetary policy or make capital flows more volatile.
Miyoshi adds that international compromise may be crucial to alleviate the concerns of G-20 economies surrounding stablecoins, as the FSB may recommend comprehensive stablecoin regulations. However, this may not satisfy certain emerging economies inclined to disallow any stablecoins altogether. The FSB and the IMF have yet to comment on the issue.
Source: Coindesk
