The Financial Stability Institute issued a warning on the need for a consistent global response to regulating stablecoins in order to minimize risks to financial stability. According to the report, different countries have varied definitions and classifications of stablecoins, creating potential challenges in ensuring financial robustness.

The report, authored by FSI Deputy Chair Juan Carlos Crisanto and Senior Advisors Johannes Ehrentraud and Denise Garcia Ocampo, highlighted the importance of aligning regulatory frameworks for stablecoins across nations. While some jurisdictions have robust regulations, others have limited or no oversight, leading to concerns about fragmentation in supervision that may threaten financial stability.

Various regulatory approaches around the world share similarities but are influenced by the diverse design features and risks associated with stablecoins. The FSI report cautioned that the lack of consistency in supervisory approaches could hinder the integration of financial systems and impact overall financial stability.

Countries globally have been considering regulatory frameworks for stablecoins, with the U.K. recognizing stablecoins as a payment method, the EU passing laws for oversight, and Japan and the U.S. initiating regulatory efforts.

The FSI emphasized the essential need for a unified regulatory framework to address risks effectively, prevent regulatory loopholes, and ensure fair competition in the digital asset sector.

Additionally, the report stressed the significance of ensuring interoperability between stablecoins, central bank digital currencies (CBDC), and other digital assets to foster a cohesive financial ecosystem.

Global institutions like the International Monetary Fund (IMF) and Financial Stability Board (FSB) are also working towards establishing universal standards for stablecoins to enhance global financial stability.