Martin Moloney, a prominent figure in financial regulation, recently addressed the IIF Digital Assets Roundtable. In his speech, he discussed the divergent challenges facing crypto-assets and tokenized assets, despite both utilizing distributed ledger technology (DLT) and smart contracts.
Moloney identified a "coordination problem within the financial sector" as the primary challenge for tokenized assets. He questioned whether the industry can balance using common standards with competitive innovation to achieve long-term scalability. He also noted that while regulation should not be a "binding constraint," risks could arise if tokenization is not conducted prudently.
In contrast, Moloney described crypto-assets as having solved growth issues but emphasized that "regulation is now a crucial, potentially binding, constraint." He highlighted ongoing regulatory developments such as the EU's Markets in Crypto-Assets Regulation (MiCAR) and upcoming U.S. reforms. The Financial Stability Board (FSB), which Moloney represents, plans to deliver a thematic peer review to the G20 on implementing global regulatory frameworks for crypto-assets by October.
Stablecoins were another focus of Moloney's remarks. He described them as "incredibly dangerous" yet clarified that the FSB has never proposed prohibiting them. Instead, robust legal claims and effective stabilization mechanisms are recommended to mitigate associated risks. Moloney stressed that cross-border cooperation is vital due to stablecoins' global nature.
Moloney concluded by warning of the dangers posed by imprudently designed stablecoins trading across borders, emphasizing that regulation can allow them to grow safely if there is a collective will to maintain system safety.