The recently concluded G20 Finance meeting highlighted regulation of stablecoins as an area that needs to be addressed soon. This follows the rise in popularity of digital assets with Facebook’s Libra being the most discussed.
Finance Representatives from G20 states were in agreement of the risks posed by the creation of digital coins. They noted that digital currencies are very likely to cause a disruption in the financial system, especially in Monetary policy functions.
Furthermore, other areas like Financial Crime are a good fit for digital money which leaves the question of how regulators can curb practices like illicit financing and money laundering if they give the green light.
According to Japan’s Central Bank Governor, Haruhiko Kuroda, the G20 is set to start discussions on how to effectively regulate digital assets. The decisions will mostly be reliant on the Financial Action Task Force and Financial Stability Board proposals that will be presented based on research. These two standard-setting bodies are expected to deliver in the course of 2020 which leaves Libra’s fate unknown till then.
Monetary Effects of Stablecoins
The G20 has involved the IMF to conduct research on implications that stablecoins might have on the current financial systems. A few emerging countries have expressed their concerns on the uncertainty of new assets that could take over transactions.
Besides being a challenge on developing economies, stablecoins also pose a threat to the most developed economies as well. Therefore, the U.S senate and Bank of Japan are among the stakeholders looking for solid solutions in regulation.
Recent developments especially the negative reactions from authorities have seen Libra lose major partners like PayPal and Mastercard. Bank of Japan’s Governor was keen to not that G20’s discussions did not touch on the issuance of digital currencies by Central Banks as well.