How Does the Term “Systemically Important” Apply to a Stablecoin?
A stablecoin is deemed "systemically important" when its failure or disruption could pose a risk to the stability of the broader financial system, not just the crypto market. This is usually determined by its large market capitalization, high volume of transactions, and its deep integration into the settlement infrastructure of major exchanges and DeFi protocols.
Regulators would impose stricter capital, liquidity, and oversight requirements on a systemically important stablecoin to mitigate the risk of a failure cascading into the traditional economy.
Glossar
Settlement Infrastructure
Framework ⎊ The settlement infrastructure, within the convergence of cryptocurrency, options trading, and financial derivatives, represents the composite of systems and protocols facilitating the finality of transactions and the transfer of ownership.
Regulatory Framework
Structure ⎊ The Regulatory Framework refers to the specific body of existing laws, rules, and enforcement policies that a jurisdiction applies to govern the issuance and trading of digital assets and related financial products.
Financial Stability Board
Oversight ⎊ The Financial Stability Board (FSB) operates as an international body monitoring the global financial system, established in the wake of the 2008 financial crisis to coordinate regulatory responses and promote financial stability.
Oversight Requirements
Compliance ⎊ Oversight requirements mandate strict compliance with a comprehensive set of rules governing market conduct, financial reporting, and operational resilience for all regulated entities.
Systemically Important Stablecoin
Resonance ⎊ A Systemically Important Stablecoin, within the cryptocurrency ecosystem, represents a digital asset pegged to a fiat currency or another stable reference, possessing characteristics that necessitate heightened regulatory oversight due to its potential to induce systemic risk across financial markets.