The Board of the International Organization of Securities Commissions today published a report identifying the possible implications of global stablecoin initiatives for securities markets regulators.
The report entitled Global Stablecoin Initiatives (hereinafter “the Report”) examines the regulatory issues arising from the use of global stablecoins and explores how existing IOSCO Principles and Standards could apply to these arrangements. IOSCO´s Fintech Network prepared the Report as part of an effort to evaluate global stablecoin proposals from a securities market regulator´s perspective.
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 and its legal and regulatory characteristics and features.
IOSCO’s 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 analyses how different IOSCO Principles and Recommendations, such as the IOSCO Policy Recommendations for Money Market Funds, the IOSCO Principles for ETFs, the Final Report on Crypto-Asset Trading Platforms and IOSCO work on Market-Fragmentation, Cyber Resilience, and Client Assets 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 at 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.
Given the potential cross-border and cross-agency reach of existing and new stablecoin structures, IOSCO is working with other international bodies and standard setters, including the Financial Stability Board (FSB), to better understand stablecoin proposals and risks. The 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, along with other standard setting bodies, has contributed extensively to the FSB report. In the meantime, the Fintech Network will continue to assess key issues arising from the analysis in this Report and will analyse any new, emerging stablecoin proposals.