Shearman & Sterling LLP | FinReg | Financial Stability Board Publishes Final Recommendations on Global Stablecoins
Financial Regulatory Developments Focus
This links to the home page
Blog
FILTERS
  • Financial Stability Board Publishes Final Recommendations on Global Stablecoins
    10/13/2020
    Following its consultation earlier this year, the Financial Stability Board has published a final report on the regulation, supervision and oversight of global stablecoin arrangements. In the report, the FSB discusses the characteristics of GSCs, the risks posed by GSCs, existing approaches to regulating and supervising GSCs and issues with cross-border supervision of GSCs. Alongside the report, the FSB has published a summary of the responses to its consultation.

    The FSB's final ten recommendations for regulation and supervision of GSCs are:
    1. Authorities should have and utilize the necessary powers, tools and resources to comprehensively regulate, supervise and oversee a GSC arrangement and its associated functions and activities, and enforce relevant laws and regulations effectively.
    2. Authorities should apply comprehensive regulatory, supervisory and oversight requirements and relevant international standards to GSC arrangements on a functional basis and proportionately to their risks.
    3. Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication and consultation to support each other in fulfilling their respective mandates and to ensure comprehensive regulation, supervision and oversight of a GSC arrangement across borders and sectors.
    4. Authorities should ensure that GSC arrangements have in place a comprehensive governance framework with a clear allocation of accountability for the functions and activities within the GSC arrangement.
    5. Authorities should ensure that GSC arrangements have effective risk management frameworks in place especially for reserve management, operational resilience, cyber security safeguards and AML/CFT measures, as well as "fit and proper" requirements.
    6. Authorities should ensure that GSC arrangements have in place robust systems for collecting, storing and safeguarding data.
    7. Authorities should ensure that GSC arrangements have appropriate recovery and resolution plans.
    8. Authorities should ensure that GSC arrangements provide users and relevant stakeholders with comprehensive and transparent information necessary to understand the functioning of the GSC arrangement, including its stabilization mechanism.
    9. Authorities should ensure that GSC arrangements provide legal clarity to users on the nature and enforceability of any redemption rights and the process for redemption, where applicable.
    10. Authorities should ensure that GSC arrangements meet all applicable regulatory, supervisory and oversight requirements of a particular jurisdiction before commencing any operations in that jurisdiction, and adapt to new regulatory requirements as necessary.

    An annex to the report sets out potential elements that could be used to determine whether a stablecoin qualifies as a GSC.

    The FSB's recommendations are intended to address the risks posed by GSCs to financial stability. Issues that they do not include are anti-money laundering and counter terrorist financing, data privacy, cyber security and consumer and investor protection.

    View the FSB's report on global stablecoin arrangements.

    View the summary of feedback to the FSB's consultation.

    Return to main website.