What is the regulatory model of stablecoins? Introduction to stablecoin regulatory model

The explosive growth of the cryptocurrency market has spawned the rise of stablecoins, which have become the preferred way for users to enter the cryptocurrency market. As an important application of blockchain technology, stablecoins provide reliable tools for implementing monetary policies in an evolving ecosystem. Stablecoins pegged to fiat currency not only ensure that fiat currency is not only secure, but also lower the threshold for users to participate in the cryptocurrency market and blockchain services. So, what is the current regulatory status of stablecoins? This article will interpret it for you.

Stablecoin Regulatory Model: Global Coordination, Risk First

Several international organizations, including the G7, the Financial Stability Committee (FSB) and the Bank for International Settlements (BIS), have successively issued relevant guidance. These opinions generally emphasize risks and challenges, covering financial stability, consumer and investor protection, anti-money laundering, anti-terrorism financing, data security, market integrity, monetary sovereignty, and other issues, as well as competition, monetary policy, cybersecurity, operational stability and regulatory uncertainty.

• G7 Summit: The 2021 G7 Summit stated that it will maintain a unified regulatory framework through the standards of the International Cooperation and Financial Stability Committee. Summit Conclusion: Any global stablecoin project must be launched after meeting relevant laws, regulations and regulatory requirements, and through appropriate design and compliance with relevant standards.

• Basell Bank Regulatory Commission: Recent consultation documents pointed out that although banks currently have limited exposure to stablecoins, the continued growth and innovation of crypto assets and related services, as well as the high interest of some banks, may exacerbate global financial stability risks and banking system risks in the absence of clear and prudent supervision.

• Bank for International Settlements (BIS): In a recent announcement, the Basel Committee proposed to classify crypto assets into stablecoins and tokenized assets, etc., and include them in the regulatory scope of the Basel Framework Agreement. The proposed regulatory roadmap suggests that stablecoins will face stricter capital reserve policies.

• Suggestions from the Financial Stability Committee (FSB): FSB proposes ten high-level recommendations aimed at dealing with the regulatory and supervision challenges brought by the "global stablecoin". These recommendations respond to the call of the G20 and take into account the views of emerging markets and developing countries. FSB believes that "global stablecoins" may challenge the integrity and effectiveness of the existing regulatory system. Therefore, it is recommended to start with regulatory stablecoins from the aspects of reserve restrictions, risk control and transparency requirements to promote coordinated supervision and effective supervision of global stablecoin arrangements to cope with financial stability risks. These recommendations emphasize regulation of proportional risks, which also leaves sufficient flexibility for countries while supporting responsible innovation.

Application scenarios of stablecoins

Stablecoins play multiple roles in the cryptocurrency market:

• Short-term profit conversion: Cryptocurrency holders can convert short-term profits into stablecoins to invest in other cryptocurrencies when the time is right, avoiding the cumbersome process of converting profits into fiat currencies and depositing them into bank accounts.

• Earnings Investment: Stablecoins can be invested in cryptocurrency exchanges or decentralized finance (DeFi) platforms to obtain interest and gains, providing a safe and attractive alternative to the way traditional finance provides savings.

• Reduce volatility risk: Stablecoins allow more people to enjoy the benefits of blockchain technology without taking the risk of severe market fluctuations. For example, in the case of local fiat currency collapse, people can exchange savings with USD, Euro or gold-backed stablecoins to prevent further depreciation.

Risk Warning: Whether stablecoins are safer than U.S.-regulated bank accounts or money market funds is still controversial. Investors must conduct sufficient research before investing. The main uses of stablecoins include facilitating cryptocurrency transactions, as a payment method, and making cross-border remittances.

I hope this article can help you understand the current regulatory status of stablecoins and their applications.

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