IOSCO published a report that examines the regulatory issues arising from the use of global stablecoins and explores how existing IOSCO Principles and Standards could apply to these arrangements. The report, which is prepared by the Fintech Network of IOSCO, identifies the possible implications of global stablecoin initiatives for securities markets regulators. The report finds that, depending on its structure, a global stablecoin may fall within securities market regulatory frameworks. Whether IOSCO Principles and Standards are relevant to stablecoins depends on the specific design of each initiative, along with its legal and regulatory characteristics and features.
The report describes a hypothetical case study that is based on a hypothetical stablecoin used for domestic and cross-border payments. The hypothetical coin uses a reserve fund and intermediaries to try to achieve a stable price vis-a-vis a basket of low volatility currencies. The report analyzes how different IOSCO principles and recommendations could apply to the case study or similarly structured stablecoins, depending on their proposed design or function. In parallel, together with the CPMI, IOSCO has carried out a separate preliminary analysis on the application of the CPMI-IOSCO principles for financial market infrastructures (PFMI), which is attached in the Annex 1 of the report. That preliminary analysis concludes that the PFMI apply to global stablecoin arrangements where such arrangements perform systemically important payment system functions or other FMI functions that are systemically important; and could therefore apply to the hypothetical case study.
The report concludes that a widely adopted global stablecoin has significant potential to create benefits to market participants, including consumers and investors, but also to exacerbate existing risks and create new risks in financial markets. Stablecoin proposals could, in the long-term, replicate existing financial products and services with the stablecoin ecosystem as a new payment medium or core component of market infrastructure. The use of stablecoins in financial services could entail significant changes to how financial markets work and, therefore, could generate risks that would need to be managed by participants in stablecoin arrangements and would require careful consideration by regulators and standard setters.
Given the potential cross-border and cross-agency reach of existing and new stablecoin structures, IOSCO and its members intend to help coordinate a global approach, as necessary. IOSCO stands ready to work with other international bodies and standard setters to have a consistent understanding of the stablecoin proposals and risks. FSB is currently examining the regulatory issues raised by global stablecoin arrangements as mandated by the G20 in June 2019 and will publish a consultative report in April 2020. IOSCO will seek to provide a venue for regulators to discuss issues relevant to the supervision of a stablecoin ecosystem that is global and widely adopted.
Keywords: International, Securities, Stablecoin, PFMI, FMI, Cross Border, IOSCO Principles, Fintech, Crypto-Asset, CPMI, FSB, IOSCO
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