The financial oversight arm of the G20, called the Financial Stability Board (FSB), has issued a report that calls for increased regulations over the stablecoin market. The report recognizes that G20 member states have limited control over how stablecoins could be regulated, as the stablecoin companies and custodians can simply choose to operate in nations that don't regulate the tokens. The FSB thinks that popular stablecoins could become systemically important, which puts national regulators in a difficult position.

According to the report,

“The decentralized nature of GSC (global stablecoin) arrangements could pose governance challenges; stabilization mechanisms and redemption arrangements could pose market, liquidity, and credit risks.”

Why it matters:There is little doubt that major central banks, like the Federal Reserve, Bank of England, and European Central Bank, are going to roll out Central Bank Digital Currencies (CBDCs) in the near future. Unfortunately for the banks, the market beat them to the punch, and has created stablecoins that are beyond their ability to regulate effectively. This leaves the banks and governments that rely on fiat currency in a bind, as any major CBDC could effectively be collateralized, and used outside of their network almost immediately after it is issued. As there is little in the way of a coordinated global effort to control cryptos, effective regulation is likely impossible.