• Stablecoins Will Be Regulated Like Fiat Payment Services

  • According to a recent proposal from regulators, stablecoins should be subjected to the same policies as more traditional payment services that only use fiat currencies.

    When large companies like Facebook attempted to launch their own stablecoin that would have been used for payments within the Facebook ecosystem, they were met with a massive regulatory wall.

    The IOSCO security regulators and the Bank for International Settlements have stated that the same rules that apply to traditional payment services like PayPal should also apply to stablecoins like Tether, which are primarily used to bridge the gap between cryptocurrencies and traditional assets.

    The proposal is still being debated by the public before being finalized in the coming year. The new policy will most likely impose the same set of rules as the aforementioned payment service. The rules will require the stablecoin’s company-issuer to act as a legal entity.

    Stablecoins experienced massive growth during the pandemic as investors sought new ways to diversify their financial portfolios and enter the rapidly expanding industry.

    Tether, the largest stablecoin on the market, will have a market capitalization of $68 billion in 2021, despite having less than half that amount just a year ago. Various stablecoins, such as USD Coin and Paxos, experienced massive multi-billion-unit growth in terms of months, according to CoinMarketCap.

    Ashley Ian Alder, the IOSCO Chair, is excited about the prospect of developing a well-organized legal framework for digital currencies that will lead to the development of clear and practical guidance standards.

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