This is actually big news for how stablecoins are going to be allowed to be used for payment going forward.
Today the Bank Of Israel published their stable coin principles for regulating their use in Israel. This is new as most countries are relying on the States to offer up their regulations first and then they will presumably follow suit.
There are some key points and expect the US to be identical to what Israel proposes as this is not like something you can just change with hundreds of choices as this is basically going to be the template moving forward.
The goal of the central bank's proposed regulations is to allow stablecoin use in the country "while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements.
The important points are these issues were raised due to the collapse of TerraUSD and if they become popular as payment would outlaw their use. They went further stating that any algorithmic stable coin with a bearer currency will be prohibited. Oh and by the way COTI is based in Tel Aviv as they are Israeli even though they have their offices in Gibraltar.
The stabelecoins they will allow are those that are backed by the collateral or reserve equaling the amount for those that are in circulation. Hong Kong has the same type of regulations which have been proposed and go live in June this year.
Another important factor is those issuing stablecoins need to be licenced by the Banking Supervision Department. Israel will oversee all stablecoin payment systems used in Israel.
Not really shocking news as this was expected as this is what COTI did with DJED by having an over collaterized stable coin by up to 8 x the value. They have a reserve token in SHEN which guarantees the value of DJED is 1 USD when you exchange it for ADA as you get $1 USD of ADA.
COTI has been part of the regulation as they are a fully registered bank and know what is required and why they are at the head of the curve. This is why DJED took time to launch as they had to make sure they had all the regulations covered which they have.
I suspect most stable coins that are currently out there will disappear and will be replaced with CBDC's as this is where this is heading. DJED and whatever other stable coins they come out with as there will be more are going to be regulation approved.
I always knew what COTI were doing was going to pay off in the future, but this is way bigger than I imagined. From my understanding any stablecoin backed by a currency will be that of a country like the USD, EURO, YEN, GBP and anything else will have to be over collaterized having a reserve in place to be legal.
I don't know what this means for our HBD as it does not have a reserve and works differently. I know they cannot stop it's use due to being decentralised, but businesses may be blocked in the future for accepting this. I suppose all we can do is wait and see what is going to be accepted or not as we shall know soon enough.