A recent Reuters article is reporting that the Financial Action Task Force (FATF) believes stablecoins may take crypto mainstream. Furthermore, the FATF is now warning that this may create issues for global anti-money laundering measures.
Are stablecoins going to pave the way for mass adoption of crypto?
The Financial Action Task Force is a Paris-based, intergovernmental task force that seeks to combat terror financing and money laundering. Furthermore, these latest comments regarding stablecoins come after a number of highly publicized setbacks for Libra, Facebook’s stablecoin.
Stablecoins are digital currencies that are, most often, backed by traditional fiat currencies. They are tied to some other store of value as to reduce fluctuations in the digital currency’s price. One criticism of “true” cryptos such as Bitcoin is that value fluctuations can hinder mass adoption.
Although some investors flock to cryptos such as Bitcoin just for this reason, it has also led to the rise of stablecoins. Now, it would appear that the Financial Action Task Force also believes that stablecoins could pave the way for mainstream adoption.
Stablecoins creating new risks or not?
The president of the Financial Action Task Force, Xiangmin Liz, recently said that this would bring a new host of problems:
“If stablecoins were to become widespread, it could potentially lead to new risks regarding money laundering and terrorist financing. It is our job to ensure the new risks in connection with stablecoins will be adequately addressed.“
Although such concerns are naturally warranted, some commentators have said that these concerns are somewhat misleading. Any type of currency or payment method would naturally be subject to rogue actors who attempt to misuse it.
As such, these “new risks” the FATF refers to would likely only be existing risks endemic to the traditional banking system. Nevertheless, a transition towards stablecoins, or crypto, would mean that these risks increasingly relate to stablecoins instead of fiat currencies.
Consequently, the perhaps most interesting part of the FATF’s statement is their belief that stablecoins could lead to mass adoption.
Specifically, they believe stablecoins “could spark the mass adoption of cryptocurrencies and peer-to-peer transfers, cutting out the need for regulated middlemen and hindering efforts to halt criminal use.”
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.