Stellar (XLM) to Serve Trillion-Dollar Stablecoin Market as Base Layer, Providing Fast and Secure Real-Time Payments

  • Stellar Lumen has highlighted fundamental ideas that policymakers, regulators, and sector experts need to consider with the fiat-backed stablecoin.
  • G20 finance ministers and central banks are in discussions to establish coordinated rules for cryptocurrencies.

In a blog published on the Stellar Website, Stellar Lumen has highlighted fundamental ideas that policymakers, regulators, and sector experts need to consider with the fiat-backed stablecoin. This comes ahead of the Financial Stability Board meeting, scheduled to unveil its comprehensive recommendations on regulating, supervising, and overseeing global stablecoin arrangements in July. 

Additionally, discussions among G20 finance ministers and central banks are underway to establish internationally coordinated rules specifically addressing cryptocurrencies, focusing on stablecoins. Some recommendations that Stellar, a cross-border payment and transfer system, has come up with regarding stablecoins include. 

To ensure the stability and integrity of stablecoins, it is recommended that the reserves supporting these tokens be held in the corresponding currency, with independent third-party verification. Stellar recommends that this verification should be made available to the public regularly. Furthermore, stablecoins must be backed by at least 100% or a combination of fiat money and high-quality liquid assets, such as short-term government bonds.

Secondly, the cross-border payment transfer system has also said that Stablecoin providers should offer a transparent assurance of 1:1 redeemability, ensuring that each stablecoin may easily be traded for its specified value. Issuers must segregate customer and corporate funds, maintaining a clear distinction.

The last recommendation from Stellar is that the process of minting and burning stablecoins should be automated to the maximum extent feasible, aligning with the corresponding reserve holdings. By automating these operations, the creation and elimination of stablecoins can accurately reflect the underlying reserve assets, ensuring a reliable and transparent mechanism for maintaining stability.

In the just concluded World of Web3 (WOW) Summit held in Hong Kong, a panel of experts in the digital regulatory field discussed the future utilization of these assets. At the summit, policymakers said that substantial attention is going toward regulating stablecoins.

During the panel discussion titled  “Digital Assets: Policies & the Road Ahead,” the participants explored the probability of regulated stablecoins continuing to be utilized until 2030. They also deliberated on how the ongoing growth rate of the stablecoin market plays a crucial role in ensuring their sustained usage.

Crypto Regulations In The Cryptocurrency Market

As the cryptocurrency world has revolutionized, more crypto regulation is needed in the ecosystem. Crypto regulation globally is characterized by a fragmented environment, with progress happening sporadically. However, there is a growing agreement regarding the prerequisites for fiat-backed stablecoin systems. Both the industry and governments are converging on the established criteria that need to be implemented, enabling stablecoins to serve as a foundation for payments and financial services while truly maintaining stability.

There are a number of different governments that have implemented crypto regulations in their countries. For instance, Countries in the European Union (EU), with their forthcoming all-encompassing framework for cryptocurrency regulation, place significant emphasis on stablecoins. 

Countries like Germany have also received accolades for offering greater clarity compared to many other regulators worldwide. There are indications that the United States is also making progress in catching up, as there are signs of movement in long-standing endeavors to establish legislation specifically for stablecoins.

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