As the war in the Gulf moves into its third month and warnings of its long-term effects on the global economy grow louder, the international financial system is increasingly coming to resemble a minefield. There are a growing number of potential flashpoints and vulnerabilities, any one of which, or a combination, could set off a crisis, perhaps worse than what we saw back in 2008. Strictly from a Western perspective, the Bank for International Settlements (BIS), the umbrella organisation of central banks, opined a couple of weeks ago about one primary risk on its list relating to stablecoins, which, according to it, pose a serious risk to financial integrity and can facilitate regulatory circumvention, making it easier to evade capital controls imposed in emerging markets and developing countries. Stablecoins are a form of cryptocurrency which supposedly provide greater stability because they are tied to an asset, generally the US dollar. Their use has been boosted by promotion from the Trump administration, which last year saw the passage of the so-called Genius Act, giving them an official stamp of approval by setting up regulations for their use. But according to the BIS, the growing use of stablecoins opens up new avenues for tax evasion. It estimates that stablecoins now account for most illicit transactions within the crypto system. This means that, if widely adopted in their current form, stablecoins would pose policy challenges in several key areas, ranging from credit provision to monetary policy.

In another development, the outgoing US Fed........

© The Nation