on the crypto
According to economists at the Bank for International Settlements (BIS), regulatory responses to private “global” stablecoins like Libra must take into account the potential of payment technology.
Protecting economies, the monetary system and consumers does not prevent public authorities from embracing innovation
In a new paper released Tuesday, Raphael Auer and Jon Frost, with Melbourne Law School financial attorney Douglas Arner, drew a line between centralized and decentralized stablecoins and said Libra will potentially be adopted in a very quick time by hundreds of people. millions of Facebook users, which means regulators will also have to adapt quickly to circumstances.
But the need to protect economies, the monetary system and consumers "does not prevent public authorities themselves from embracing innovation". Facebook Inc. (NASDAQ shares: FB) who designed the cryptocurrency Libra, recently announced the limited release of Libra in the first quarter of 2021. Global stablecoins offer advantages particularly in cross-border payments, according to the document, and can challenge existing payment types in the e-commerce.
Making the best use of technology to achieve regulatory, supervisory and cost reduction goals
Stablecoins are generally cryptocurrencies that attempt to hold value pegged to fiat currencies, such as the US dollar or other assets. The paper argues that technology in general offers the potential to increase oversight and provides the tools needed to implement and enforce financial regulation.
In particular, stablecoins offer the possibility to implement supervision requirements and frameworks in the systems that manage them, paving the way for “integrated supervision”. "The direct and automated provision of data as a licensing requirement or registration for digital payment systems and markets offers an important opportunity to better use technology to meet regulatory and supervisory goals, as well as reduce costs for market participants, ”said the authors.
Stablecoins, especially decentralized ones, also offer the possibility of building “a robust monetary instrument” in blockchain applications, such as for programmable money.
The analysis of alternative products to stablecoins
The paper also examined the possibility that alternative payment methods, such as central bank digital currency or rapid payment systems, would be better suited to the "functions that stablecoins try to address", concluding that they could be more effective "in many cases". .
However, building frameworks for oversight and monitoring of transactions directly in stablecoin systems has the potential to improve the achievement of regulatory goals, the authors said. Ironically, the technology was "initially ... aimed at making the role of regulation superfluous," they wrote.
