- Stablecoin’s got mainstream adoption when facebook purposed it’s own stablecoin, Libra.
- G20 leaders had acknowledged that blockchain technology could bring benefits to the global financial system and the broader economy.
- Fed’s Financial Stability Report stated that the stablecoin plan, has the potential to achieve widespread adoption quickly.
The year 2019, witnessed the launch of the proposal of global stablecoin Libra, by Facebook. Post this, even sceptical officials forced to accept the existence of digital assets. Further, in 2020, a lot of countries, as well as global regulators, had referred stablecoins as the regulatory focus.
In the month November in the previous year, the European Central Bank President Christine Lagarde, had spoken at the European Bank Conference in Frankfurt for the first time. They talked about structural changes in the global economy and also alluded to blockchain and emerging technologies.
Christine Lagarde also added that persistent trade tensions and geopolitical uncertainty have been leading to a slowdown in world trade growth. Since the last year, the growth rate has halved. This, in turn, has depressed global growth to its lowest level since the financial crisis.
Further in December, Lagarde also acknowledged that stablecoins were an area of focus during her tenure. Further, the G20 summit which held in Osaka, Japan in June 2019 HD also included digital assets on the conference agenda.
In their statement, G20 leaders had acknowledged that blockchain technology could bring benefits to the global financial system and the broader economy. They also reiterated that digital assets currently do not pose a threat to global financial stability.
However, they did recommend strictly monitoring the development of digital currencies and continuously monitoring their potential risks.
Since many stable currencies use the same mechanisms as real-world currencies, like the currency boards, a basket of currencies, pegged to the US dollar, and even open market operations. Due to this, they face the same risks as traditional currencies and also may meet the same regulations.
The term “globally stable currency” has appeared in regulators to describe digital currencies like Libra. However, these currencies are not decentralized, and they are most likely to be widely adopted.
Anti-Money Laundering, Financial Action Task Force (FATF) had made unique recommendations on Anti-Terrorist Financing, which recognized as a global anti-money laundering (AML) and counter-terrorism financing (CFT) standard.
In October, the Financial Stability Board (FSB) / G20-FSB Chairman Randal K. Quarles had written in a letter to G20 leaders saying that the introduction of Global Stablecoin may pose a series of challenges to the regulatory community. They have the potential to become systemically important, including the possibility of replacing domestic currencies.
Further in November, Fed’s Financial Stability Report stated that the stablecoin plan, which builds on existing large cross-border customer networks, like Facebook’s Libra, has the potential to achieve widespread adoption quickly.
These plans referred to as Global Stablecoins. But if not properly designed and unregulated, it could affect financial stability negatively.