The Financial Stability Board (FSB) said that many stablecoins will fail to meet the requirements of its forthcoming recommendations on regulating cryptocurrency assets.

What happened: According to an official document released on Monday, the regulator stressed the importance of maintaining effective “stabilization” mechanisms and strengthening redemption rights to ensure the stability of the financial system and the protection of investors’ rights.

“Importantly, the FSB’s work concludes that many existing stablecoins would not currently comply with these high-level recommendations, international standards and the supplemental, more detailed guidance from the International Organization of the Securities Commission’s BIS Committee on Payments and Market Infrastructures,” added the FSB.

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stablecoin is kind of cryptocurrency where the value of the digital asset is said to be tied to an asset or fiat money. Some examples include tether USDT/USD And USD coin USDC/USD.

FSB believes that stricter regulations need to be put in place for crypto sectorafter the numerous high-profile scandals that have plagued the industry over the past year.

“The events of the past year, such as the collapse of FTX, have highlighted the intrinsic volatility and structural vulnerabilities of crypto assets. We have now seen firsthand that the failure of a key intermediary in the crypto-asset ecosystem can quickly transfer risk to other parts of that ecosystem,” the financial watchdog said.

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