G20: Stablecoins Are Unstable

According to the Financial Stability Board (FSB) of the G20 group, none of the existing stablecoins meet the standards set for digital assets by the central banks of the largest economies.

The organization issued 2 years ago recommendations on the regulation of “stablecoins.” In a new report recently released, the FSB has reviewed the market and proposed policy changes for discussion.

The organization has noted the instability of such coins. Algorithmic stablecoins that rely on third-party asset arbitrage, like Terra’s recently-collapsed UST, do not have a reliable price maintenance mechanism.

The example of USDT from Tether demonstrated backed coins are not able to maintain a peg in a fever in the market. This type of stablecoin also suffers from the quality of the collateral and its opacity.