IOSCO and BIS Call for ‘Same Risk, Same Regulation’ for Stablecoins

IOSCO, a global body for securities regulators, and a committee at the Bank for International Settlements (BIS) published guidance on Wednesday, stating when existing payments regulations should apply to stablecoins.

The guidance makes a major step toward applying 'same risk, same regulation' on stablecoins, which are used for payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term.

“Recent developments in the cryptoasset market have again brought urgency for authorities to address the potential risks posed by cryptoassets, including stablecoins more broadly,” said Sir Jon Cunliffe, the Chair of the CPMI and Deputy Governor for Financial Stability at the Bank of England.

Indeed, the crypto market is going through turmoil, not only because of bearish price trends but also because of the collapse of several high-flying businesses. TerraUSD, an algorithmic stablecoin Stablecoin Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Read this Term, collapsed first and then several crypto lenders and brokerages.

“The recent market disruptions, while costly for many, were not systemic events… Such events could become systemic in the future, especially given the strong growth in these markets and the increasing linkages between crypto-assets and with traditional finance,” Sir Cunliffe added.

Advantages of Stablecoins

The two global financial industry bodies also acknowledged the advantages of stablecoins over the existing financial market infrastructure. On top of that, these prompted the guidance to elaborate on governance, risk management, settlement finality and money settlements.

“Our risk management, governance and transparency standards for existing financial market infrastructures are stringent. We expect the same level of robustness and strength in these aspects in systemically important stablecoin arrangements,” said Ashley Alder, the Chair of the IOSCO and the future Chair of the United Kingdom’s FCA.

The guidance stressed the risks of stablecoins’ interaction with cryptos and decentralized finance (DeFi) protocols, which could lead to a “fragmented and fragile monetary system.”

Now, the two bodies called for cooperation between central banks and other authorities to bring strong regulations for the stablecoins.