Japanese financial authorities are worried about the proliferation of stablecoins throughout the traditional finance system. Steps are being taken to increase regulatory scrutiny of private digital assets before they become too big to deal with.
The Japanese government is becoming alarmed at how quickly stablecoins are proliferating throughout the financial system, and therefore it is stepping up its efforts globally to agree on how regulation can reign in this private digital asset revolution.
An article on Reuters this morning discussed the surge in new forms of money, in the shape of private digital assets such as stablecoins. It looked at how Tokyo was struggling to keep abreast of the global debate among financial regulators on how to impose far tighter rules on these types of assets.
Regulators from the group of seven industrial powers and many others from around the world have talked about far stricter regulation of stablecoins, which are digital currencies pegged to fiat currencies, usually the dollar.
Japan’s Financial Services Agency (FSA) has recently formed a new section to concentrate on the regulation of digital currencies. One official was quoted as saying:
“Japan can no longer leave things unattended with global developments over digital currencies moving so rapidly,”
As with China’s roll-out of its digital yuan, Japan is concentrating efforts on researching and developing its own digital yen. The official line is that these forms of digital currencies will be a safer option than the largely unregulated private digital currencies.
Other central banks are following suit. The Bank of England stated last week that private digital currencies weren’t a threat as of yet, but if they should become so, then stablecoins should be regulated in the same way as bank payments.
The US Federal Reserve chairman, Jerome Powell, was more hawkish when he remarked that increased regulation should be brought to bear on cryptocurrencies, given that they could potentially pose risks to financial stability.
More thoughts on stablecoins
Stablecoins play an extremely important role in the cryptocurrency sector. They provide a stable value in relation to fiat currencies or commodities such as gold. Their importance comes in the area of protection from volatility, given that Bitcoin and other cryptocurrencies do experience large swings due to the nascent nature of the crypto markets.
These digital assets still haven’t made enough of a dent in the existing financial markets that is large enough to cause more concern. However, we are still in the early days of alternative financial innovation.
Another type of private stablecoin that is preparing for a mass roll-out this year is the Diem stablecoin. This is an iteration of what was formerly called the Libra, backed by Facebook. The Libra was halted in its tracks by financial regulators appalled at Facebook’s previous poor reputation regarding privacy and security.
The Diem stablecoin is backed by an association of 26 private companies, headquartered in Geneva, the vision of which is to “enable universal access to financial services”. Perhaps worried as to the fate which befell the Facebook predecessor, the Diem organisation has promised to withdraw the Diem as soon as a US central bank digital currency (CBDC) becomes available.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Credit: Source link
