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 .
“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 , 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.
