ECB President Outlines Work to Assess Risks of Stablecoin Initiatives
The ECB President Mario Draghi, in a letter to Markus Ferber, a Member of the European Parliament, provided an overview of the work of the European System of Central Banks (ESCB) in assessing the potential risks of stablecoin initiatives to financial stability and operational and cyber resilience. ESCB is closely monitoring innovation in the financial sector, including stablecoin projects such as Libra, said Mr. Draghi. Central banks in the ESCB are also contributing to the ongoing work of the G7 working group on stablecoins, which is chaired by the ECB Executive Board member Benoît Cœuré in his capacity as Chair of the BIS Committee on Payments and Market Infrastructures.
As large technology or financial firms could leverage vast existing customer bases to rapidly achieve a global footprint, it is imperative that authorities be vigilant in assessing risks and implications for the global financial system. Stablecoin initiatives must ensure public trust by meeting the highest regulatory standards and be subject to prudent supervision and oversight. From a regulatory perspective, stablecoins, like any other emerging financial product, should be subject to the “same business, same risks, same rules” principle based on a comprehensive assessment of their functionalities, said Mr. Draghi in his letter. Technology-neutral regulation not only prevents regulatory arbitrage but also helps avoid the risk of inadvertently constraining technological development. To ensure a level playing field, the ESCB intends to pursue an internationally consistent approach together with the global central bank community and standard-setting bodies.
Related Link: ECB Letter (PDF)
Keywords: Europe, EU, Banking, Stablecoin, Libra, Cryptocurrencies, Financial Stability, ECB
Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.
