Stablecoins need regulation first
Korea’s Financial Service Commission (FSC) made it clear that stablecoins, like Facebook’s Libra, can only be incorporated into the financial system once regulations are written for them. It also stressed that cooperation with international bodies should be enforced in order to prevent the usage of stablecoins for money laundering. G20 cooperation for stablecoin regulation According to a Jan. 14 press release, FSC Standing Commissioner Sohn Byung-doo participated in the Financial Stability Board (FSB) committee meeting held in Basel, Switzerland, the previous day. At the FSB meeting, central banks, financial supervisory heads of 20 countries and heads of 11 international organizations, including the International Monetary Fund and Europe Central Bank, get together to decide on major issues. In June, the G20 recognized the potential influence of stablecoins may have in the future and requested reviews on ways to regulate and monitor them. In response, the FSB conducted a survey on current stablecoin regulation and supervision. During the meeting there was a discussion on basic principles. An important task mentioned was the prevention of regulatory arbitrage and increasing efficacy of international cooperation. Enforcing cooperation “The FSC should take a holistic approach to potential risks that could happen before stablecoins are incorporated into the global financial system and come up with a corresponding regulatory plan before that,” said Sohn. “Considering the effects stablecoins may have on currency policies and anti-money laundering, there needs to be enforced cooperation with international organizations. To prevent regulatory arbitrage, we should establish communications between advanced and developing countries for coordinated responses regarding stablecoin regulation.” In October 2019, the FSB sent an official document warning about the potential risks of global stablecoins, including money laundering, being used as funds for terrorism and the possibility of replacing legal tender, threatening financial stability.