Regulated Stablecoins May Not Improve Cross-Border Payments, Says CPMI Report

According to CoinDesk, a report by the Committee on Payment and Market Infrastructures (CPMI) suggests that even fully regulated stablecoins may not have a positive impact on cross-border payments. The report highlights challenges such as coordination, competition, network scale, and inadequate regulation, which could outweigh any potential benefits. CPMI, which sets standards for the Bank for International Settlements, acknowledges that no existing stablecoin is fully compliant with relevant regulatory requirements. Even if a compliant stablecoin were to exist, it might not significantly improve cross-border payments.Stablecoins could potentially speed up transactions and lower costs for cross-border transfers, but the drawbacks may be more significant. Standard-setters are working to introduce norms for stablecoins, especially after Facebook (now Meta) proposed a currency and terraUSD (UST) de-pegged from the U.S. dollar in May 2022, causing major disruptions in the crypto world. The Financial Stability Board (FSB) warned in February that existing stablecoins would fall short of the upcoming global standards.The CPMI report is part of an effort announced last October to investigate if stablecoins could help improve cross-border payments. The findings indicate that even if properly designed and regulated stablecoin arrangements existed, they might not necessarily have a positive impact on cross-border payments. Fabio Panetta, the incoming head of CPMI and former European Central Bank board member, stated in a Financial Times op-ed that the world needs a better cross-border payments network, but unbacked crypto and even stablecoins cannot guarantee convertibility at par at all times, making them prone to runs.