Cryptoassets and So-called “Stablecoins”: Where Do We Go From Here?

The market capitalization of cryptoassets and so-called “stablecoins” has fallen by over 50% since November 2021, with the drop over twice as sharp as that in the S&P 500. While they have been touted for their potential to increase the efficiency of financial transactions and to support financial inclusion, their high volatility and largely unregulated and quasianonymous nature has raised concerns over investor protection and financial integrity, and increasingly also financial stability and international spillovers. Some of these risks have materialized during the May 2022 market rout, lending new urgency to calls for enhanced regulation and supervision. Policy solutions include bringing cash- and asset-backed stablecoins under the regulatory umbrella, reviewing and updating regulations to safeguard financial stability and integrity and harness technology, strengthening cooperation across sectors and jurisdictions, and addressing underlying domestic macroeconomic and structural challenges.