IOSCO Explores Application of Existing Standards to Stablecoins
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.
Related Links
Keywords: International, Securities, Stablecoin, PFMI, FMI, Cross Border, IOSCO Principles, Fintech, Crypto-Asset, CPMI, FSB, IOSCO
Previous Article
GFIN Publishes Report on Lessons Learned from Cross-Border TestingRelated Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
