FSB Addresses Stablecoin Risks in Emerging Markets

The Financial Stability Board (FSB) is scrutinizing the use of stablecoins in emerging markets.

This announcement followed a plenary board meeting in Toronto, where the FSB highlighted the unique challenges crypto-assets pose for monetary policy and capital flow management in emerging market and developing economies (EMDEs). The board noted the higher adoption rates and risks associated with global stablecoin arrangements in these regions and committed to further work to address these challenges.

In a recent report on stablecoin regulation, PYMNTS explained that digital assets are central to the crypto sector’s resurgence. Stablecoins, pegged to reserve assets like fiat currencies or commodities such as gold, aim to provide the benefits of cryptocurrencies—security, privacy, and quick transaction times—while reducing price volatility.

At the end of this month, the European Union will implement the landmark Markets in Crypto-Assets Act (MiCA) stablecoin regulations, part of a broader strategy to enhance clarity and security in the crypto market. MiCA aims to protect consumers, strengthen financial stability, and foster innovation by establishing clear guidelines for stablecoin operations, mitigating risks like volatility and market manipulation.

The recent PYMNTS Intelligence report “Can Blockchain Solve the Cross-Border Payments Puzzle?” highlighted that integrating stablecoins into payment systems can offer fast, reliable, and cost-effective alternatives for cross-border transactions, reducing currency-exchange risks.

The FSB also stated it would continue monitoring the implementation of last year’s crypto regulations globally, emphasizing the importance of broad, global enforcement to prevent regulatory arbitrage in the crypto sector.