Central Bank Rules Leave No Room For Private Stablecoins: Report

The Central Bank rules for digital currencies could lead to restrictions for existing stablecoins as a few countries and regions are developing fiat-backed and central bank digital currencies as we are reading more in the latest cryptocurrency news.

Some regulators aim to restrict or to even ban the existing stablecoins in order to make more room for official CBDCs. However, these central bank rules have not yet been enforced. Numerous central bank digital currencies are under development which means that various countries plan on issuing a digital asset tied to their own regional fiat currency. This was considered as mostly good news for the crypto industry but the recent trends ask whether CBDC regulation could harm popular stablecoins that are already in circulation.

The people’s Bank of China published a draft law which indicates that no third party is allowed to create a yuan-backed cryptocurrency, as the document stated:

 “No unit or individual may make or sell tokens, coupons and digital tokens to replace RMB in circulation in the market.”

Companies that violate these rules will be fined a few times the income that they generate. If the new law is passed, China’s CBDC will be the only stablecoin for citizens. China is not alone as in September alone, few European nations announced plans to restrict third-party stablecoins until regulations are passed. The restrictions are not permanent but the law is clearly designed to make room for regulated central bank digital currencies. Bruno Le Maire the Finance Minister of France has stated that the European Central Bank should be “the only one to be allowed to issue a currency.”

The Financial Stability Board which is an international G20 organization recommended a lot of restrictions on stablecoins but it didn’t recommend that nations create their own CBDC as the suggested policies leave room for the heavy regulated stablecoins projects that put CBDCs in a major advantage. The extent to which these regulations will be enforced is unclear as assets like Tether’s yuan-pegged stablecoin seem to be operating as normal which means that the regulations under consideration that they don’t pose immediate threats.

Numerous stablecoins have already faced regulatory issues in the past as Facebook’s Libra faced a lot of resistance from regulators and Basis famously failed back in 2018 due to the regulatory issues. JPMorgan and Stronghold in the meantime which restricted their stablecoins to the institutional customers. Regulations that favor CBDC will add more obstacles to the projects to consider.
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Even if CBDC-related regulations will not result in bans on traditional stablecoins, regulations are becoming more complex.