đšđ„ Attention, crypto enthusiasts! Stablecoins could disrupt emerging economies more than ever! đ„đš
The latest study from the Financial Stability Board (FSB) reveals major risks and regulatory challenges for developing countries facing the adoption of global stablecoins (GSC). On July 23, the FSB released an alarming report on the growing financial and macroeconomic risks associated with the use of foreign currency-backed stablecoins in these vulnerable regions.
đ Why is this adoption of stablecoins so concerning? The increase in their use in emerging economies is fueled by limited access to traditional banking services, high remittance flows and the volatility of local currencies. However, financial regulators are sounding the alarm, warning that these digital assets could destabilize financial systems and strain fiscal resources.
âThe collapses and de-peggings of some stablecoins since the crypto-asset market turmoil in 2022 highlight the potential fragility of poorly designed and poorly regulated stablecoins.â
The risks are high for developing countries, where regulatory capacity is often insufficient. The report highlights several key concerns: threatened financial integrity, increased potential for illicit financing, data privacy concerns and cybersecurity vulnerabilities, not to mention the need for stronger protections for consumers and investors.
Additionally, stablecoins can disrupt market integrity, fiscal stability, and macroeconomic balance. Although these risks are global, developing countries face particular challenges that make it difficult to implement effective regulatory measures.
Yet the appeal of stablecoins as an alternative to local currencies remains strong in these regions, due to limited access to banking services, the need for efficient transfer services, and the desire to protect against local currency instability. The report therefore recommends that policymakers and regulators put in place strong regulatory frameworks, strengthen cross-border cooperation and develop local capacities to supervise these activities and protect financial stability.
đ The current state of stablecoins: The most famous stablecoins â Tether (USDT), USD Coin ($USDC ), Binance USD (BUSD), Dai (DAI), and TrueUSD ($TUSD ) â are mainly backed by the US dollar. In early July, Paxos received full regulatory approval from the Monetary Authority of Singapore (MAS) to issue its gold-backed stablecoin, Pax Gold ($PAXG ). On July 24, Jingdong Coinlink Technology Hong Kong Limited revealed plans to issue a stablecoin pegged to the Hong Kong dollar (HKD). Additionally, the European Union introduced its first laws on June 30, pushing cryptocurrency exchanges to delist certain non-compliant stablecoins or restrict their services for users based in the EU and EEA. Exchanges like Uphold, Binance, Kraken, and OKX have started delisting stablecoins like USDT, while Bitstamp plans to delist Euro Tether (EURT). Experts speculate on a possible shift to euro-backed stablecoins if demand increases in European markets.
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