Stablecoins are gaining traction in the mainstream financial sector, presenting both opportunities and challenges. „They hold the promise to mirror the value of fiat currencies but consistently achieving value parity remains a challenge.” according to a BIS paper focused on stablecoins.
As the stablecoin market continues to evolve in its quest to offer a means of payment, national and international regulatory bodies are responding to these developments by implementing a comprehensive suite of measures aimed at mitigating the risks associated with stablecoin issuance. These measures span critical areas, including licensing, reserve asset management, redemption rights, capital adequacy, consumer protection, governance and risk management, cyber security and anti-money laundering (AML)/countering the financing of terrorism (CFT) compliance.
This paper assesses the evolving regulatory landscape for issuers of single fiat-pegged stablecoins. It compares regulatory frameworks issued by 11 authorities in seven jurisdictions to identify emerging trends and commonalities in their respective frameworks.
Executive summary
In contrast to other cryptoassets, stablecoins come with a promise of stability. Their issuers promise
that they can maintain parity relative to a referenced asset and be redeemed upon request. Among various types, stablecoins that are pegged to a single currency, such as the US dollar, and backed by traditional financial assets have the potential to be widely used as a means of payment. Due to this potential, they are increasingly entering mainstream finance, and a number of jurisdictions have developed regulatory approaches for issuers of stablecoins pegged to a single fiat currency.
While stablecoins might bring a range of benefits, they also introduce significant risks. Proponents argue that they have the potential to increase financial inclusion, reduce costs and enhance the efficiency of cross-border payments. Yet many benefits remain theoretical. Instances of stablecoins de-pegging and, in some cases, collapsing have occurred, undermining their promised stability. Moreover, their role in illicit activities and potential to threaten financial stability, especially if their ties to traditional finance deepen, raise concerns.
Many regulatory approaches have similar key requirements for stablecoin issuers. Most follow two types of authorisation regimes that allow stablecoins to be issued by: (i) banks and certain nonbank financial institutions; and/or (ii) a new type of financial entity holding a crypto-specific licence. Issuers are widely required to maintain reserves in segregated accounts equal to the value of their stablecoins in circulation. Regulations generally emphasise prudential, governance, risk management, anti-money laundering and countering the financing of terrorism (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 terminology used to define in-scope stablecoins varies significantly across regulations. There are also notable differences in the specifics of the regulatory treatment of reserves, and in relation to segregation and custody. Despite common expectations about redemption policies, the nature of stablecoin holders’ claims varies across regimes, as well as the treatment of redemption fees.
As the adoption of stablecoins increases, preventing regulatory fragmentation and achieving a harmonious coexistence of different types of digital assets will become more important. Authorities face the challenge of establishing a regulatory framework that encourages innovation while mitigating risks. Therefore, as stablecoin markets develop, international cooperation will be critical to shape an effective and consistent regulatory environment for stablecoins. In addition, the interoperability of stablecoins with other digital assets, such as central bank digital currencies (CBDCs) and tokenised deposits, will help to facilitate an integrated global financial system.
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
