The Bank for International Settlements has suggested recommendations for regulating global stablecoins according to the BIS’s summary of recommendations released on Thursday.
TakeAway Points:
- The Bank for International Settlements has issued recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
- The recommendation aims to mitigate the risks to financial stability that GSCs represent on a global and domestic level.
- The recommendation emphasizes the need for control over cross-border collaboration, coordination, and information sharing.
Recommendations for GSC arrangements
GSCs are stablecoins that have gained widespread acceptance and have the potential to be utilized in several jurisdictions.
Related articlesYou may also like
“A GSC could become systemically important in and across one or many jurisdictions,”
the BIS said.
The BIS summary highlighted key recommendations that aim to mitigate the risks to financial stability that GSCs represent on a global and domestic level.
The suggestions also seek to encourage innovation in GSC and give states the freedom to adopt local strategies.
However, some key suggestions emphasize the need for global government control over cross-border collaboration, coordination, and information sharing.
Risk management recommendations
The proposals set out the top priorities for international authorities to guarantee the efficacy of GSC risk management regimes.
“Risk management frameworks should be in place that comprehensively address all material risks associated with their functions and activities, especially with regard to operational resilience, cyber security safeguards and anti-money laundering/countering the financing of terrorism measures, as well as ‘fit and proper’ requirements, if applicable, and consistent with jurisdictions’ laws and regulations,”
the BIS added.
Also, an important section of the recommendation summary addresses redemption rights, prudential regulations, and data storage and access.
In addition, BIS also noted in their assessment that stablecoins may improve the effectiveness of financial service delivery; however, “they may also generate risks to financial stability.”
“The recommendations seek to promote consistent and effective regulation, supervision and oversight of GSCs and stablecoins with the potential to become GSCs across jurisdictions. In addition, these recommendations emphasize a technology-neutral approach that prioritizes underlying activities and risks,”
the BIS added.
