Despite the tumbling prices of the cryptocurrency market, the trends of stablecoins are becoming hotter every new day. However, an American private equity investor, who is also a vice-chair for the supervision of the Federal Reserve Board of Governors, Randal Keith Quarles made a serious note on stablecoin.
On October 3, 2019, Randal K. Quarles at the European Banking Federation’s Banking Summit in Brussels, Belgium discussed the financial crises and the need to establish international financial regulatory standards to tackle the problem of financial stability and market fragmentation.
He stressed on regulating and supervising stablecoins and crypto-assets on his speech on Thursday. Randal K. Quarles affirms that the rise of stablecoin could raise the concern of regulators. He said;
“Although there is a small risk to financial stability today, there is no doubt the potential scale of stablecoins and other crypto-assets yet to emerge may pose regulatory challenges,”
Major concern Fragmentation of Financial markets
Due to the financial crisis, there is a chance of an upcoming fragmentation of financial markets which may result in high regulatory requirements and diminishing global financial markets. However, in a few cases, the market fragmentation can be favorable for financial stability to absorb the losses of global banks. But in the bigger picture, it can lead to a major burden for the organizations.
Resolution for Financial crisis “too-big-to-fail”
In his speech, Randal mentions about the “Key Attributes for Effective Resolution,” as the remedy for the financial crisis, in which if SIFI (global systemically important financial institution) fails then there is an option by which the authorities will be able to conduct a bail-in recapitalization and also aids in recognizing the strength, responsibilities and different tools to settle the financial issue. Currently, the assessment of stablecoins is carried out by G7 and FSB. They are working towards identifying the best regulations and will eventually report to G20 for further steps to be taken.
Randal further elaborates that;
“We have already begun work to identify which regulations exist that apply to stablecoins in our jurisdictions, and once that assessment is complete, we will report to the G20 on any appropriate actions that need to be taken to ensure that financial stability is not negatively affected by their stablecoins.
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