U.S. The Federal Reserve Board warned on Friday that a crisis of stability pressure could destroy the global economy and outlined the measures issuers must take to protect the status quo.
The central bank's forecast – buried deep in the November issue of its biannual "Financial Stability Report" – rests on a worst result in the stack: a race of issuers, in which coin holders panic and demand the return of fiat they fence.
Stablecoins is a form of cryptocurrency that maintains value by sticking to fiat reserves. While bitcoin volatility, the most-owned cryptocurrency, is a favorite talking point for detractors, Stabecoin's digital currencies are backed 1
The report's concern is that something could go wrong with the way stacklecoin works – be it with operations, liquidity or credit. "This loss of confidence can lead to a run," it says.
"In an extreme scenario, holders may not be able to [liquidate] with potentially serious consequences for domestic or international economic activity, asset prices or financial stability."
Since the full launch of the Libra stablecoin concept in June, the Fed governors, along with US regulators and colleagues abroad, have sounded alarm bells. In addition to the digital currency issue, integration with the social consumer network can be disastrous, the report warns.
“Stablecoin initiatives built on existing large and cross-border customer networks , like Facebook's Libra, has the potential to quickly achieve widespread adoption, "the report states, referring to comments by Fed Governor Lael Brainard last month .
But now condensed into a single document, consolidates and the report formalizes the concerns of regulators and notes the steps needed to prevent a disaster with a stable spin.
Fed's report said:
- Issuers must disclose how their bet mechanism works
- Issuers must protect customer data privacy while maintaining KYC records to prevent unlawful use
- Issuers must disclose their terms of service  Issuers must notify customers if they have any rights to the underlying asset
"As Group of Seven has noted," no global Stabecoin project shall commence operations prior to the legal, regulatory and regulatory challenges and risks outlined [in this report] is adequately safeguarded, through appropriate design and by following regulations that are clear and proportionate to the risk. & # 39; ”
Federal Reserve image via Shutterstock