In response to an increasing number of private and public initiatives to implement global stablecoins, on April 14, 2020, the G20’s Financial Stability Board (FSB) issued a Consultative Document, “Addressing the regulatory, supervisory and oversight challenges raised by ‘global stablecoin’ arrangements.” A “stablecoin” aims to maintain a consistent value relative to a specific asset, pool or basket, whereas a global stablecoin is one that has the potential to reach across multiple jurisdictions and achieve substantial volume.
The FSB recognizes that while stablecoins have the potential to enhance efficiency in the delivery of financial services, it is not without risk of creating financial instability. The report also highlights key international financial regulatory standards from the Basel Committee, the Financial Action Task Force, the Committee of Payments and Market Infrastructures and the International Organization of Securities Commissions that could apply to “global stablecoins.” The document (i) describes global stablecoins, or GSCs, and how they may differ from other digitized assets and other stablecoins; (ii) analyses the potential associated risks raised by the use of GSCs; (iii) considers existing regulatory, supervisory and oversight approaches to GSCs; (iv) identifies issues that regulators, supervisors, and oversight authorities should consider in this area; (v) considers the specific challenges arising in a cross-border context, such as the need for cross-border cooperation and coordination; and (vi) makes high-level recommendations for regulatory, supervisory and oversight responses, including multilateral actions.
Focused on providing a forum for dialogue among industry participants and regulators, the document sets out 10 “high-level” recommendations for regulators to consider with respect to the requisite power and resources to comprehensively regulate, supervise, and oversee and GSC arrangement; regulatory requirements on a functional basis and proportionate to risks; cross-border cooperation and coordination among regulators; allocation of accountability; effective risk-management frameworks (including cybersecurity and AML/CFT; collection, storage, management and protection of data; recovery and resolution plans; comprehensive and transparent information sharing, including with respect to stabilization mechanism; legal clarity for users, including with respect to redemption rights; compliance with applicable regulatory, supervisory, and oversight requirements within the jurisdiction.
Comments are sought on a number of specific issues, including:
- Distinguishing characteristics of GSCs compared with other digitized assets and stablecoins;
- Stabilization mechanisms, including associated risks and vulnerabilities;
- Risks to financial stability arising from GSCs;
- Potential regulatory authorities and scope of international standards that should be applied; and
- Balancing financial stability, market integrity, and consumer protection without constraining beneficial financial and technological innovation.