FSB launched a consultation on ten high-level recommendations to address the regulatory, supervisory, and oversight challenges raised by “global stablecoin” arrangements. The recommendations stress the need for flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information-sharing arrangements that take into account the evolution of global stablecoin arrangements and the risks they may pose over time. The public consultation will close on July 15, 2020 while the final recommendations will be published in October 2020.
The consultative document describes global stablecoins and how they may differ from other crypto-assets and other stablecoins; and analyzes the potential risks raised by global stablecoins. The document considers the challenges arising in a cross-border context, including the need for cross-border cooperation and coordination, before making high-level recommendations for regulatory, supervisory and oversight responses, including multilateral actions. The document also outlines the key international financial regulatory standards from BCBS, Financial Action Task Force, CPMI, and IOSCO that could apply to global stablecoins. FSB has made the following recommendations:
- Authorities should have and utilize the necessary powers and tools, and adequate resources, to comprehensively regulate, supervise, and oversee a global stablecoin arrangement and its multi-functional activities.
- Authorities should apply regulatory requirements to global stablecoin arrangements on a functional basis, as proportionate to their risks.
- Authorities should ensure that there is comprehensive regulation, supervision, and oversight of the global stablecoin arrangement across borders and sectors. Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication and consultation to support each other in fulfilling their respective mandates and to facilitate comprehensive regulation, supervision, and oversight of a global stablecoin arrangement across borders and sectors.
- Authorities should ensure that global stablecoin arrangements have in place a comprehensive governance framework with a clear allocation of accountability for the functions and activities within the global stablecoin arrangement.
- Authorities should ensure that global stablecoin arrangements have effective risk management frameworks in place, especially with regard to reserve management, operational resiliency, cyber-security safeguards, anti-money laundering and countering the financing of terrorism and proliferation (AML/CFT) measures, and fit-and-proper requirements.
- Authorities should ensure that global stablecoin arrangements have in place robust systems for safeguarding, collecting, storing, and managing data.
- Authorities should ensure that global stablecoin arrangements have appropriate recovery and resolution plans.
- Authorities should ensure that global stablecoin arrangements provide to users and relevant stakeholders comprehensive and transparent information necessary to understand the functioning of the global stablecoin arrangement, including with respect to its stabilization mechanism.
- Authorities should ensure that global stablecoin arrangements provide legal clarity to users on the nature and enforceability of any redemption rights and the process for redemption, where applicable.
- Authorities should ensure that global stablecoin arrangements meet all applicable regulatory, supervisory, and oversight requirements of a jurisdiction before commencing any operations in that jurisdiction; authorities should also construct systems and products that can adapt to new regulatory requirements, as necessary.
The recommendations respond to a call by the G20 to examine regulatory issues raised by global stablecoin arrangements and to advise on multilateral responses as appropriate, taking into account the perspective of emerging market and developing economies. The recommendations build on a comprehensive assessment of the existing regulatory, supervisory, and oversight approaches from FSB and non-FSB jurisdictions.
Comment Due Date: July 15, 2020
Keywords: International, Banking, Securities, Recommendations, Crypto Assets, Cross-Border Cooperation, Proportionality, Recovery and Resolution, Governance, G20, Stable Coins, Digital Currencies, FSB
Previous ArticleFSB Chair Updates G20 on COVID-19 Response
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.