Post by Bank for International Settlements – BIS

Financial innovations, including stablecoins, are raising fundamental questions about how money adapts to the digital age. In a speech at Bank of Japan, Pablo Hernández de Cos laid out the opportunities and challenges around stablecoins and stressed the need for international cooperation on regulation. Stablecoins incorporate attractive technological features which can enable integration with smart contracts and faster cross-border payments. But their use for real economy transactions remains modest, with usage dominated by crypto trading. “Existing stablecoin arrangements and design features fall short of the requirements for a widely accepted and used payment instrument,” he said at the seminar, which was also attended by BOJ Governor Kazuo Ueda. “Stablecoins seek to leverage trust in fiat currency. This underscores that the monetary anchor provided by central banks remains indispensable – regardless of the future role of stablecoins or any other technological innovation. Ultimately, money is far more than a technology: it is an institutional achievement.” If stablecoins were to compete meaningfully with conventional forms of money, there would be implications for credit provision, financial stability, financial integrity, monetary policy and fiscal policy. We must consider all these areas when assessing the implications of stablecoins for the monetary and financial system, Mr Hernández de Cos said. As policymakers continue to refine regulatory frameworks, international cooperation is critically important to avoid market fragmentation and regulatory arbitrage. Read the speech at: https://bit.ly/3Qyew4V