On Apr. 9, Basel published insights paper on stablecoins regulations.
Basel issued paperStablecoins: regulatory responses to their promise of stability.
Financial Stability Institute (FSI) Insights on policy implementation No 57.
Key Points
In contrast to other cryptoassets, stablecoins come with a promise of stability and their issuers promise that they can maintain parity relative to a referenced asset.
Stablecoins pegged to a single currency, such as USD and backed by traditional financial assets have the potential to be widely used as a means of payment.
Now stablecoins are entering mainstream finance and a number of jurisdictions are developing approaches for issuers of stablecoins pegged to a single fiat currency.
While stablecoins might bring a range of benefits, they also introduce significant risks.
Currently, proponents argue that they have the potential to increase financial inclusion, reduce costs and enhance the efficiency of cross-border payments with stablecoins.
Yet many benefits remain theoretical. Instances of stablecoins de-pegging and, in some cases, collapsing have occurred, undermining their promised stability.
Many jurisdiction regulatory approaches have similar key requirements for stablecoin issuers that allow for stablecoins to be issued by banks and certain nonbank financial institutions; and/or a new type of financial entity holding a crypto-specific license.
Regulations generally emphasize prudential, governance, risk management, AML/CFT and disclosure requirements, and providing clear information to stablecoin holders.
However, there are relevant differences in regulatory regimes that could lead to a lack of consistency and coordination in the oversight of stablecoins across jurisdictions.
The key difference is that terminology used to define in-scope stablecoins varies significantly across jurisdictions and differences in specifics of reserve treatment.
As the adoption of stablecoins increases, preventing regulatory fragmentation and achieving a harmonious coexistence of different types of digital assets will be key.
