FSB published a note that examines the regulatory issues around stablecoins. FSB emphasizes that the launch of stablecoin-type arrangements for domestic and cross-border retail payments with the potential to reach global scale could alter the current assessment that crypto-assets do not pose a material risk to financial stability. With this recent development, stablecoin arrangements could potentially become a source of systemic risk. The note was delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington. In April 2020, FSB plans to submit to G20 a consultative report on the issues identified in stablecoin arrangements with a potential global footprint. The final report on this is expected to be published in July 2020.
The note explains that an effective regulatory and supervisory approach needs to be able to identify, monitor, and address potential risks in a reasonable range of scenarios and use cases. Such an approach requires a clear understanding of the individual components of a stablecoin arrangement and their interaction, including from a legal point of view. These components could include entities or structures involved in issuing stablecoins; entities or structures that manage assets linked to the coins; infrastructure for transferring coins; market participants or structures facing users (for example, platforms or exchanges, wallet providers) and the governance structure for the arrangement. The governance structure could include the role and responsibilities of a possible governance body and the underlying stabilization mechanism used for the stablecoin.
To implement the G20 mandate and to build on the earlier work of the G7, FSB will:
- Take stock of existing supervisory and regulatory approaches and emerging practices in this field, with a focus on cross-border issues while taking into account the perspective of emerging markets and developing economies. In light of existing national regulatory and supervisory frameworks, individual authorities may consider different approaches toward stablecoin arrangements.
- Consider, based on the stocktake, whether existing supervisory and regulatory approaches are adequate and effective in addressing financial stability and systemic risk concerns that could arise from the individual components of a stablecoin arrangement or their interaction as an ecosystem. This may include questions about how the existing national regulatory and supervisory frameworks interact to ensure that risks can be identified and addressed wherever the individual components of a stablecoin arrangement may be located jurisdictionally. It would also involve considering to what extent different regulatory classifications of stablecoins under existing national regimes or supervisory approaches could give rise to regulatory arbitrage and how national regulatory and supervisory authorities need to coordinate to ensure effective regulatory and supervisory oversight and address any risk of regulatory arbitrage.
Advise on possible multilateral responses, if deemed necessary, including developing regulatory and supervisory approaches to addressing financial stability and systemic risk concerns at the global level. Such challenges could involve the compatibility of national approaches or potential outright gaps resulting from the global nature of stablecoin arrangements. The analysis would also investigate what, if any, actions may be needed to further strengthen cooperation and coordination to address global financial stability and systemic risk concerns.
Keywords: International, Banking, Stablecoins, Fintech, Crypto-Asset, Systemic Risk, Regulatory Arbitrage, Governance, FSB
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