Financial stability standards are a set of principles and guidelines designed to maintain the soundness and resilience of the financial system. These standards address capital adequacy, liquidity risk, operational resilience, and market infrastructure integrity. Adherence to these measures helps prevent systemic crises and protect consumers.
Context
The rapid expansion of digital assets and decentralized finance (DeFi) has prompted global regulators to assess their potential impact on existing financial stability standards. Debates concern the need to adapt or extend current frameworks to account for novel risks introduced by crypto markets, such as volatility, interconnectedness, and potential for contagion. Establishing appropriate standards is vital for safe innovation.
The new federal stablecoin law mandates 100% liquid reserves and holder bankruptcy priority, fundamentally recoding the operational risk profile for issuers.
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