London c.bank test lab develops stable coins

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London c.bank test lab develops stable coins

A global central bank test lab run from London is designing a'stable coin' monitoring system that will give authorities a clearer picture of how they work and how to regulate them in the future.

Stablecoins are a type of cryptanalym that is intended to maintain a 1: 1 peg with a fiat currency such as the dollar. The collapse of a widely-used stable coin, Luna and TerraUSD, caused widespread turmoil in the criptocurrency markets.

The Bank for International Settlements BIS, often dubbed the central bank for the world's central banks, is going to start working in its London's Innovation Hub in order to keep tabs on them, as a way to make sure there is more oversight going forward.

It is expected to run various tests and simulations on a yet to be defined number of stable coin and their balance sheets and come up with preliminary findings by the end of the year.

The BIS said that central banks don't have tools to monitor stable coins and avoid asset-liability mismatches.

The BIS added that the project, named Pyxtrial after an old judicial ceremony in Britain to ensure newly minted coins conformed to required standards, could help regulators build policy frameworks.

One of the key hopes is that it will give more visibility to what assets stable coins are backing.

In October, the Financial Stability Board FSB, which coordinates financial rulemaking among Group of 20 Economies G 20, made a set of recommendations on beefing up the oversight of the market.

The sector is currently largely unregulated in most countries, having to comply with rules for safeguarding against money laundering and terrorist financing, as regulators warn investors they risk losing every penny.