Binance has released a comprehensive report, “Overview of Global Stablecoin Regulation,” detailing the varying regulatory approaches toward stablecoins in key jurisdictions. Since stablecoins are anchored to fiat or other real assets, governments across different jurisdictions have changed their rules to foster innovation while protecting consumers.
The report outlines the global comparison of the legal approaches to stablecoins as their regulation. The European Union has presented one of the most elaborate regulatory frameworks, the Markets in Crypto-Assets (MiCA) regulation. MiCA outlines clear prerequisites for stablecoin issuance, rules for reserve management, and procedures for redemptions. For instance, the EU has prohibited the use of algorithmic stablecoins, which are cryptocurrencies backed by algorithms.
In contrast, the United Kingdom, Singapore, and Dubai have chosen more liberal models of regulation. Although the three regions have not prohibited the use of algorithmic stablecoins, they are in the process of enhancing supervision. All regions seek to foster innovation within the cryptocurrency industry whilst at the same time promoting financial stability and consumer protection.
TerraUSD collapse sparks global regulatory responses
Major events like the recent TerraUSD (UST) fiasco in 2022 have led to the calls for regulation globally. As a result, a majority of countries have stepped up their regulation to avoid future crises of this kind.
The debates on possible measures to restrict algorithmic stablecoins in the United States have intensified. The regulation of the U.S. is still in its infancy, and most of the emphasis has been placed on the protection of the consumer and the place of stablecoins in the financial ecosystem.
According to the Binance report, the EU’s MiCA framework can act as a reference for the regulation of global stablecoins. The proposed MiCA brings legal certainty to the issuers of tokens and creates a stable environment in the market.
Other regions are also enhancing the development of their regulatory frameworks. The UK has released guidelines that require stablecoins to be reliably backed by assets that are considered liquid and highly rated. Singapore is supporting innovation while managing risk, and Dubai is trying to become the centre for digital assets by providing a clear legal framework for stablecoins. The Binance report also identified non-USD stablecoins to increase in the future.