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Issued by the Bank for International Settlements (BIS) Payment and Market Infrastructure Commission (CPMI) and the International Organization of Securities Commissions (IOSCO) guidance About the stable coin regulation of the past July 13th.
The press release stated that the guidance aims to apply a “same risk, same regulation” legal approach to system-critical stablecoins used for payments.
This guidance compares the transfer function of Stablecoin with the transfer function performed by other financial market infrastructures (FMIs). Therefore, the principles of financial market infrastructure (PFMI) must be adhered to by Stablecoin, which is considered transferable and essential to the financial system.
PFMI is an international standard set for financial institutions. The scope of PFMI is to increase the security and efficiency of financial institutions, limit systemic risk, and promote transparency and financial stability.
PFMI already provides guidelines for determining which FMI is required. For example, any FMI that can cause systemic confusion is considered important. BIS guidance sets further standards to identify which stablecoin is important.
This includes the size of stablecoin that can be determined from various data points, such as the number of users and transactions, the value of the transaction, the value of the stablecoin in circulation, and so on.
While assessing the importance of Stablecoin, authorities should also consider Stablecoin’s risk profile, its relevance to the traditional financial system, and its availability in place of time-critical services.
However, the report states that countries can choose whether to require Stablecoin to comply with PFMI.
BIS Guidance details the governance, risk management, settlement finality, and monetary settlement that Stablecoin must follow. For example, the BIS report states that there must be one or more clearly identifiable legal entities operated by a small number of people who can be held accountable and accountable. In addition, stablecoin publishers should regularly monitor stablecoin risks and implement appropriate risk management frameworks to mitigate those risks.
The BIS report states that Stablecoin issuers minimize and tightly control Stablecoin’s credit and liquidity risk and “acceptable alternatives to Stablecoin’s use of central bank funds. He added that it is necessary to confirm that it is a “means”.
An important caveat is that the guidance does not cover stablecoins fixed in fiat baskets. The report added that BIS will continue to investigate whether the current guidelines are sufficient for such multi-currency-backed stablecoins.
Guidance added that Stablecoin may have other “defects” beyond the scope of PFMI, such as consumer protection, data privacy, money laundering prevention, and terrorist financing.
Therefore, Stablecoin regulation, supervision, and oversight alone may not be sufficient to address these challenges and should be as stated in the report.
“Complemented by other private or public sector efforts, such as improving existing payment infrastructure or investigating or developing central bank digital currencies.”
Stablecoin regulation has become a priority for governments and international organizations since the collapse of the Terra ecosystem in May spotlighted the potential risks posed by these assets.
Sir Jon Cunliff, Chairman of the CPMI and Deputy Governor of Financial Stability at the Bank of England, said the current market turmoil is causing widespread losses, but the turmoil is not considered a “systemic event.” Stated. However, these market turmoil points to the rate at which market confidence is lost and the volatility of cryptocurrencies at such times, Cunliffe said. He warned:
“Events like this have the potential to become systematic in the future, especially given the strong growth of these markets and the growing link between crypto assets and traditional finance.”
