stable coins
By Julie Binoche
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Emerging Markets Face Currency Pressure. The dollarisation problem hits different in emerging markets.
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Fragmented Rules Create Loopholes. De Cos warned that mismatched standards could fracture markets.
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Dollar stablecoins could blow up financial stability. That's the stark warning from the Bank for International Settlements, which wants regulators worldwide to get their act…
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BIS General Manager Pablo Hernández de Cos drew some uncomfortable parallels between big dollar stablecoins and exchange-traded funds.
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Things get messier when you look at how people actually use these tokens. De Cos flagged serious gaps in financial integrity controls because stablecoins run on public…
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The dollarisation problem hits different in emerging markets. Households there are already using dollar-pegged tokens to stash savings offshore, and some are starting to use them…
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Local currencies take a beating in the process. When citizens can easily switch to dollar stablecoins, it puts downward pressure on domestic exchange rates.
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Major jurisdictions are scrambling to write rulebooks. The European Union rolled out its Markets in Crypto-Assets Regulation. The UK is finalizing rules for fiat-backed tokens.
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De Cos warned that mismatched standards could fracture markets. When one place has tight rules and another doesn't, activity just migrates to wherever regulators ask fewer…
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See also: Dollar Gains Ground as U.S.-Iran Tensions Send Traders Scrambling for Safety
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The BIS thinks stablecoins could start behaving like investment funds if usage scales up enough.
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Capital control evasion worries the BIS too. Emerging market governments use these controls to prevent destabilizing money outflows during crises.
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Public blockchains and unhosted wallets make enforcement nearly impossible under current systems.
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The reserve backing question matters more than it seems. Full reserves sound safe, but what counts as a reserve?
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Redemption rights vary wildly between issuers too. Some promise instant redemptions for everyone. Others have minimum amounts or processing delays.
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