International Monetary Fund (IMF) Focuses on Stablecoins, Emphasizes Need for Consistent Regulation and Oversight

US Bank Collapse Impacts Stablecoins

In its Global Financial Stability Report released on the 11th, the International Monetary Fund (IMF) referred to the bankruptcies of multiple entities that have occurred one after another since last year, stating that “comprehensive and consistent regulations and He stressed the need for a director.

The report explores the impact of the US Silicon Valley Bank (SVB) failure on stablecoins.

Circle, which operates USDC, the second-largest stablecoin by market capitalization, announced in March that it had deposited $3.3 billion, or about 8% of its total reserves, in SVB. Lack of liquidity led to widespread credit fears, driving USDC well below its $1 benchmark. Depegging has turned USDC into a bank run.

connection:US Circle puts transfer of $3.3 billion USDC reserves pending at Silicon Valley Bank

This impact has spread to stablecoin DAI, which is partially backed by USDC. Furthermore, the deterioration of investor sentiment led to the collapse of Signature Bank, which is closely related to cryptocurrencies.

He also mentioned the bankruptcy of Silvergate Bank, which specialized in the cryptocurrency market. These bank failures have contributed to further damage to the credibility of the cryptocurrency market, which had already suffered from the collapse of major exchange FTX last November, the report said. .

The IMF argues that this series of events deepens doubts about the viability of cryptocurrencies and reaffirms the need for proper regulation.

Regulatory framework

The IMF argued that “all significant activities and entities, including those related to holding, transferring, exchanging and custody of reserves” should be subject to regulation. He stressed that businesses that offer multiple functions should be subject to additional prudential requirements, and that stablecoin issuers are required to meet stringent prudential requirements.

In addition, given the nature of cryptocurrencies that transcends sectors and national borders, strong international cooperation supported by “robust, easy-to-understand, and globally consistent cryptocurrency regulations” is essential to contain contagion risks. said to be essential.

Financial Stability Risk and Stablecoins

In March, the IMF, in its report to the G20 entitled “Macrofinancial Implications of Crypto Assets,” said that “unbacked crypto assets and stablecoins without credible backing” could pose financial stability risks. pointed out that there is a

In addition, especially in countries with fragile banking systems, the spread of virtual currencies (mainly stablecoins) may eliminate the intermediation function of bank deposits, and the diversion of savings will weaken credit intermediation. claims to be

The report comes after the IMF Executive Board said in February that “cryptocurrencies should not be given official or legal tender status in order to protect monetary sovereignty and stability.”

Board members, meanwhile, said they agreed that a blanket ban on cryptocurrencies was “not the first option.”

connection:IMF warns of cryptocurrency impact on banks: G20 report

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