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Global Standards for Stablecoins

When used at scale as a means of payment, stablecoins can present material risks to the financial system. A new consultative report on applying current international payments standards to these digital coins is a milestone in three respects.

HONG KONG/LONDON – Rapid technological change is increasingly spurring private – and often Big Tech-promoted – initiatives throughout the world of finance, particularly in the payments domain. As a result, the global financial system has arrived at a potentially game-changing moment.

Recent developments include so-called stablecoins, which avoid the volatility of their higher-profile crypto cousins, like Bitcoin, because their value is supported by a pool of assets. Stablecoins have the potential to support competition in payments, deploying technology and innovation to reduce cost and offer new services. But when used at scale as a means of payment, they can present material risks to the financial system.

Every day, millions of households and businesses, as well as the financial sector, rely on payment systems to transfer funds. These networks are the bedrock of the financial system, supporting virtually every transaction in the economy. If they are disrupted for any reason, or if users lose confidence in them, the impact on financial stability and the real economy can be enormous.