On its blog, the Cardano Foundation has shared its views on the need for regulation to ensure the development of stablecoins and digital assets.
The Cardano Foundation maintains that The creation of an adequate regulatory framework for cryptoassets will boost the development of the blockchain ecosystem, which is why one of its priorities has been to collaborate with global regulators to constructively contribute to the creation of appropriate regulation that enables innovation.
On its official blog, the Foundation shared its views on crypto regulation, in response to a public consultation conducted by the Financial Stability Board (FSB) late last year. The FSB is the international body tasked with monitoring and making recommendations on the global financial system and its regulation.
The public consultation conducted by the CEF sought recommendations from stakeholders on how to include cryptoassets, especially stablecoins, within a comprehensive regulation.
In response, the Cardano Foundation, the organization that develops the Cardano blockchain ecosystem and that is about to be introduced A new algorithmic stablecoin in the ecosystem this month, stressed that the creation and establishment of a good, solid and friendly regulatory policy will favor the development of innovation, while mitigating the risk in the cryptoasset markets.
While many of the current use cases for cryptocurrencies and blockchain technology are related to the financial system, the Foundation stressed that global policymakers and regulators should not focus solely on the financial or similar activities of cryptoassets. Instead, it recalled that there is a wide range of applications and use cases for the blockchain ecosystem that are being developed and will be developed in the future.
Stablecoins in the crosshairs of global regulators
Cryptoassets have been in the sights of regulators for several years now. However, the prominence and popularity that stablecoins have gained as potential global means of payment have captured greater interest.
According to the CEF, stablecoins are not currently used for large-scale payments. However, due to the ease with which these digital currencies can send cross-border payments and their potential as bridges for exchanges between fiat currencies and other cryptoassets, they may become global currencies, operating in substantial volumes that would pose new risks to financial stability.
The CEF will publish its recommendations on the regulation of stablecoins and digital assets in June this year.
However, regarding algorithmic stablecoins, such as the one that the Cardano network is about to launch, the international body he pointed that these types of coins operated by a smart contract will be excluded from their recommendations, due to the fact that they resemble unsupported tokens that may not maintain their stability.
For the CEF, Algorithmic stablecoins “may not be suitable for retail or wholesale payment transactions”.
DJED, Cardano's algorithmic stablecoin, will launch this month
The Cardano blockchain ecosystem is about to introduce a new algorithmic stablecoin into the crypto ecosystem. It is DJED, an overcollateralized algorithmic stablecoin developed by Cardano together with Coti Network.
DJED will be pegged to the US dollar and will use a multi-currency ecosystem, backed by ADA, the native cryptocurrency of the Cardano network, and SHEN, as a reserve currency to ensure its stability.
This algorithmic stablecoin will help Cardano strengthen the development of its decentralized finance (DeFi) ecosystem, whose protocols and DApps have seen a significant boost in the last month, according to data from the DeFi Llama platform.
Source: DeFi Llama
In addition to DJED, Cardano will introduce another stablecoin to the blockchain ecosystem this year. Called USDA, the coin will be the first US-pegged stablecoin that will comply with current regulations and whose value will be fully backed by the US dollar.
Continue reading: Cardano stablecoin coming in 2023
