The Financial Stability Board (FSB) said that many stablecoins will not meet the requirements stipulated in its upcoming recommendations for cryptocurrency asset regulation.

What Happened: According to an official document published Monday, the regulator emphasized the importance of maintaining effective "stabilization" mechanisms and strengthening redemption rights, in order 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 meet these high-level recommendations, nor would they meet the international standards and supplementary, more detailed BIS Committee on Payments and Market Infrastructures-International Organization of Securities Commission’s guidance,” the FSB added.

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Stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to an asset or fiat money. Some examples include Tether (CRYPTO: USDT) and USD Coin (CRYPTO: USDC).

FSB believes that tighter regulations must be put in place for the crypto sector, following the numerous high-profile scandals that plagued the industry in the last 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 first-hand that the failure of a key intermediary in the crypto-asset ecosystem can quickly transmit risks to other parts of that ecosystem,” the financial watchdog said.

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