Financial Stability Board Consults on Global Stablecoins
04/14/2020The Financial Stability Board has launched a consultation on global stablecoin arrangements. The consultation is in response to the G20 mandating the FSB to analyze potential regulatory issues posed by global stablecoins and to advise on multilateral responses. Responses to the consultation should be submitted by July 15, 2020. The FSB's final report is expected to be published in October 2020.
The consultation paper explains global stablecoins, differentiating them from other crypto-assets and stablecoins, discusses the potential risks posed by global stablecoins and sets out existing regulatory approaches to the regulation, supervision and oversight of global stablecoin arrangements as well as highlighting the key relevant standards and principles set by the international standard-setting bodies. The FSB also identifies the issues that regulators and other authorities may need to address and analyzes the challenges arising in a cross-border context, in particular those on cross-border cooperation and coordination. The FSB makes ten high-level recommendations for regulatory, supervisory and oversight responses, including multilateral actions, which focus on financial regulatory and supervisory issues relating to privately-issued global stablecoins mostly intended for retail use. Issues such as monetary policy, monetary sovereignty, currency substitution, data privacy, competition, and taxation issues are out of scope of the consultation. The FSB's ten recommendations are:
- Authorities should have and use the necessary powers and tools, including adequate resources, to comprehensively regulate, supervise and oversee a global stablecoin arrangement and its multi-functional activities, and enforce relevant laws and regulations effectively;
- Authorities should apply regulatory requirements to global stablecoin arrangements on a functional basis and proportionate to their risks;
- Authorities should ensure that there is comprehensive regulation, supervision and oversight of the global stablecoin arrangement across borders and sectors. Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication and consultation in order to support each other in fulfilling their respective mandates and to facilitate comprehensive regulation, supervision and oversight of a global stablecoin arrangement across borders and sectors;
- Authorities should ensure that global stablecoin arrangements have in place a comprehensive governance framework with a clear allocation of accountability for the functions and activities within the global stablecoin arrangement;
- Authorities should ensure that global stablecoin arrangements have effective risk management frameworks in place, in particular on reserve management, operational resiliency, cybersecurity safeguards and AML/CFT measures, as well as "fit and proper" requirements;
- Authorities should ensure that global stablecoin arrangements have in place robust systems for safeguarding, collecting, storing and managing data;
- Authorities should ensure that global stablecoin arrangements have appropriate recovery and resolution plans;
- Authorities should ensure that global stablecoin arrangements provide to users and relevant stakeholders comprehensive and transparent information necessary to understand the functioning of the global stablecoin arrangement, including with respect to its stabilization mechanism;
- Authorities should ensure that global stablecoin arrangements provide legal clarity to users on the nature and enforceability of any redemption rights and the process for redemption, where applicable; and
- Authorities should ensure that global stablecoin arrangements meet all applicable regulatory, supervisory and oversight requirements of a particular jurisdiction before commencing any operations in that jurisdiction, and construct systems and products that can adapt to new regulatory requirements as necessary.
View the FSB's consultation paper on global stablecoins.
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