The Financial Stability Board (FSB), which is an international body that monitors and makes recommendations about the global financial system, has issued a report in which clarified recommendations to regulate stablecoins on intergovernmental level.
The watchdog admits that stablecoins have the potential to enhance the efficiency of the provision of financial services, however, they "may also generate risks to financial stability, if they are adopted at a significant scale."
The FSB states stablecoins represents an attempt to address the high volatility of cryptocurrencies.
"They have the potential to bring efficiencies to payments (including cross-border payments), and to promote financial inclusion," the reports says.
In addition to that, the FSB highlights that stablecoins could become "systemically important" in various jurisdictions.
Hence, the regulator proposed 10 high-level recommendations that are addressed to authorities at the jurisdictional level to advance consistent and effective regulation and supervision:
- Authorities should comprehensively regulate, supervise, and oversee the "so-called global stablecoin" (GSC) arrangement and its multi-functional activities, and enforce relevant laws and regulations effectively.
- Authorities should apply regulatory requirements to GSC arrangements on a functional basis and proportionate to their risks.
- Authorities should ensure that there is comprehensive regulation, supervision and oversight of the GSC 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 GSC arrangement across borders and sectors.
- 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.
- Authorities should ensure that GSC arrangements have effective risk management frameworks in place especially with regard to reserve management, operational resiliency, cybersecurity safeguards and AML/CFT measures, as well as ‘fit and proper’ requirements.
- Authorities should ensure that GSC arrangements have in place robust systems for safeguarding, collecting, storing and managing data.
- Authorities should ensure that GSC arrangements have appropriate recovery and resolution plans.
- Authorities should ensure that GSC arrangements provide to users and relevant stakeholders comprehensive and transparent information necessary to understand the functioning of the GSC arrangement, including with respect to its stabilization mechanism.
- 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.
- 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 construct systems and products that can adapt to new regulatory requirements as necessary
The regulator emphasized that the same rules should apply to various stablecoins regardless of the technology used.
Companies that issue stablecoins should be also able to effectively manage risks, ensure sustainability, provide guarantees against cyberattacks and comply with the rules for preventing money laundering and terrorist financing.
Back in 2018, the FSB presented a new report in which said that "crypto-assets do not pose a material risk to global financial stability at this time."
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