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FATF and BIS Highlight Systemic Risks of Stablecoins to Global Financial Stability

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On June 24, the Financial Action Task Force (FATF) warned that stablecoins have become a preferred tool for illegal activities such as money laundering and terrorist financing. Their anonymity and borderless transaction features facilitate illicit use, while lagging global regulation and conflicting jurisdictions have amplified fraud risks. FATF emphasized that regulatory failures in a single jurisdiction could trigger global ripple effects.

Meanwhile, the Bank for International Settlements (BIS) noted in its annual report that stablecoins lack the final settlement function provided by central banks. Their value may fluctuate across issuers, undermining monetary uniformity. Additionally, the “stability” they promise conflicts with the risks inherent in their profit models, potentially triggering financial stability risks like asset sell-offs and threatening emerging economies’ monetary sovereignty and capital controls.

Combining the two institutions’ views, stablecoins have multiple systemic flaws. They are unlikely to become a pillar of the future monetary system and pose threats to global financial stability and security.