The world’s top central bankers are warning everyone that stable coins are not-so-stable.
What happened: The Bank for International Settlements, the forum for 63 top central banks, came out hard against stablecoins, claiming they fail to meet criteria to be safely used as money as they aren’t backed by central banks and have no guardrails against illicit use.
- Stablecoins are a cryptocurrency designed to maintain a constant value, usually pegged to the U.S. dollar. Over $260 billion worth of them are in circulation.
Why it matters: The warning comes as multiple parties are trying to push stablecoins into mainstream finance and commerce, with the U.S. government leading the charge. The GENIUS Act, which would establish the first framework for USD-pegged stablecoins passed the Senate and is headed for the House. Many businesses are on the same page.
- Just this month, MasterCard said it will integrate the FIUSD stablecoin into its payment system, Shopify said it will make stablecoin payments available to merchants, and both Walmart and Amazon began exploring issuing their own coins.
- Stablecoins present an attractive option for e-com sellers as transaction fees can be as low as 0.1% compared to credit card transaction fees which can be up to 3.5%
In Canada: Stablecoins are considered securities or derivatives. Rules for issuance came into force last year, though a CAD-pegged coin has yet to be made publicly available.—QH