Featured Product

    CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements

    October 06, 2021

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems. The consultative report contains guidance on the application of the Principles for Financial Market Infrastructures (PFMI) to systemically important stablecoin arrangements. Regulators seek feedback, by December 01, 2021, on the consultative report in general as well as on the questions set out in the report. The standard-setters acknowledge that some issues identified in this report may require further clarification and follow-up work in 2022 and beyond, as the features of certain projects and stablecoin arrangement functions evolve.

    Stablecoin arrangements may present some notable and novel features, which relate to the potential use of settlement assets that are neither central bank money nor commercial bank money and carry additional financial risk; the novel features also relate to, the interdependencies between multiple stablecoin arrangements functions, the degree of decentralization of operations and/or governance, and a potential large-scale deployment of emerging technologies such as the distributed ledger technology. This report proposes guidance on the application of the PFMI with respect to these features of stablecoin arrangements, which should help stablecoin arrangements and relevant authorities in applying the PFMI to systemically important stablecoin arrangements. The guidance covers issues related to governance, comprehensive risk management, settlement finality, and money settlements:

    • When seeking to observe this principle of governance, a systemically important stablecoin arrangements should consider how the stablecoin arrangements' ownership structure and operation allow for clear and direct lines of responsibility and accountability.
    • A systemically important stablecoin arrangement should develop appropriate risk-management frameworks and tools and should identify and implement appropriate mitigants, taking an integrated and comprehensive view of its risks.
    • A systemically important stablecoin arrangement should provide clear and final settlement, regardless of the operational settlement method used; it should clearly define the point at which a transfer on the ledger becomes irrevocable and technical settlement happens and make it transparent whether and to what extent there could be a misalignment between technical settlement and legal finality.
    • A stablecoin used by a systemically important stablecoin arrangement for money settlements should have little or no credit or liquidity risk. In assessing the risk presented by the stablecoin, the stablecoin arrangement should consider whether the stablecoin provides its holders with a direct legal claim on the issuer and/or claim on, title to or interest in the underlying reserve assets for timely convertibility at par into other liquid assets such as claims on a central bank. It should also consider whether the stablecoin has a clear and robust process for fulfilling holders’ claims in both normal and stressed times.

    This report is not intended to create additional standards for stablecoin arrangements but rather to provide more clarity to systemically important stablecoin arrangements and relevant authorities as those stablecoin arrangements seek to observe the PFMI. CPMI and IOSCO may further examine regulatory, supervisory, and oversight issues associated with stablecoin arrangements and, as appropriate, coordinate with other standard-setting bodies to address the outstanding gaps. CPMI and IOSCO believe that guidance on the application of the PFMI with respect to these features of stablecoin arrangements is useful for stablecoin arrangements and relevant authorities in applying the PFMI to systemically important stablecoin arrangements. The guidance focuses on a subset of the PFMI for which the CPMI and IOSCO consider that guidance is warranted in light of notable features of stablecoin arrangements as compared to existing financial market infrastructures. This guidance should be read in conjunction with the relevant principles, key considerations, and explanatory notes of the PFMI as well as with the further considerations provided in Section 3. This report is a key contribution to the G20 roadmap on cross-border payments and supports the FSB work in this area.

     

    Related Links

    Comment Due Date: December 01, 2021

    Keywords: International, Banking, Stablecoin, Fintech, Regtech, Governance, PFMI, FMI, Cross-Border Payments, G20, Operational Risk, Systemic Risk, CPMI, IOSCO

    Featured Experts
    Related Articles
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699