Stablecoins May Be the Next Target for Regulators and Banks. Here’s Why This Could Be a Major Blow to Crypto
Crypto goes through volatile periods not only in the market but outside of it as well. One of the biggest examples of this is the recent announcement that the Financial Stability Board is encouraging banks and countries to place more regulations on stablecoins, potentially ban fully decentralized solutions, and develop their own for use by those who are interested in these products.
Of course, both those in favor of the regulations and those against them have their arguments as to why they believe these actions should or should not be taken. But let’s imagine for a second that this advice was put into action by those who have been advised to follow through. What would this look like for crypto?
The Elimination or Heavy Regulation of Stablecoins
The Financial Stability Board (FSB) worries that stablecoins could be a threat to the global economy and its financial stability. In both advanced and developing countries, they are concerned about the potential for citizens to begin accepting stablecoins over traditional fiat currencies. While the chance of this happening is not great, it is still enough for them to recommend a preemptive strike on the industry.
The biggest area of concern would be the immediate crackdown on decentralized stablecoin products as these are the solutions that give traders the ability to maintain control over their own assets while being able to experience the stability they are looking for. However, this would not just affect these stablecoin models, but the stablecoin industry as a whole, putting all stablecoins under strict regulations and requiring developers to follow these rules. However, the likelihood that developers would instead have to leave their projects is far greater, which would leave fiat-backed stablecoins issues by banks the only solutions standing.
These problems wouldn’t stop at stablecoins but would impact the crypto industry as a whole. Without stablecoins, which play a major role in the crypto economy and allow frictionless trading between volatile assets and more stable options, Bitcoin and altcoins could be greatly impacted by the lack of trading with stablecoins, which would have a ripple effect throughout the entire ecosystem. True, while the switch over to bank-backed stablecoins would be an interesting development to see, especially if adoption were widespread and people began using it more than traditional fiat currency, it simply comes at too great a cost to the currency structure of crypto.
But if this isn’t currently happening, why is it something that you should worry about?
Why Is It Concerning?
There has been no shortage of people or governments attempting to place greater restrictions or regulatory guidelines on crypto. That said, the FSB is an extremely large and powerful financial organization that is tasked with monitoring current developments within the world that could pose financial risks to economies, both established and developing. What they have to say carries a lot of weight. While there is no action being taken now, that is not to say that there won’t be action taken later.
Despite the strength of crypto today, it is always important to look to the future and to keep track of emerging news and trends. As long as everyone is informed, knowledgeable, and aware of the developments around them, they can spot where crypto is going and carve a better path.
***
Trakx is building a one-stop shop for Crypto Traded Indices. Discover more about our project on our website and social media channels, such as Telegram http://t.me/trakx_io.
