Bank for International Settlements (BIS) Issues Recommendations for Global Stablecoin Regulation
The Bank for International Settlements (BIS) has recently released a set of recommendations for the regulation, supervision, and oversight of global stablecoin arrangements. The BIS, which is an international financial institution, recognizes the potential benefits of stablecoins in improving the efficiency of financial services. However, they also highlight the risks that these assets can pose to financial stability.
Potential Benefits and Risks of Global Stablecoins
The BIS defines global stablecoins (GSC) as stablecoins that have the potential to reach and be used across multiple jurisdictions and become systemically important. They have listed ten key recommendations for maintaining the stable value of these coins relative to a specified asset. Some of these recommendations include:
- Comprehensive oversight of GSC activities and functions
- Cross-border cooperation, coordination, and information sharing
- Establishment of authoritative risk management frameworks
The BIS emphasizes the importance of authorities collaborating at both domestic and international levels to ensure consistent regulatory and supervisory outcomes for GSC arrangements.
Importance of Authorities’ “Readiness” to Regulate and Supervise Stablecoins
The executive summary further highlights the need for authorities to be prepared to regulate and supervise global stablecoin arrangements. It emphasizes the importance of conforming with regulatory, supervisory, and oversight requirements before commencing operations. The BIS recommends that authorities possess the necessary powers, tools, resources, and knowledge to effectively regulate, supervise, oversee, and enforce relevant laws and regulations.
Additionally, a technology-neutral approach is encouraged, prioritizing underlying activities and risks rather than specific technologies.
Promoting Consistent and Effective Regulation, Supervision, and Oversight
The BIS, founded in 1930, serves as a bank for central banks and aims to support their pursuit of monetary and financial stability through international cooperation. The Group of 20 (G20) had previously tasked the Financial Stability Board with examining regulatory issues related to global stablecoin arrangements.
The BIS’s recommendations seek to promote consistent and effective regulation, supervision, and oversight of global stablecoin arrangements across jurisdictions. These recommendations are intended to address the concerns raised by the G20 and ensure the stability of the financial system.
Hot Take: A Step Towards a Regulated Stablecoin Market
The Bank for International Settlements (BIS) has taken a significant step towards regulating the global stablecoin market with its recent release of recommendations. By acknowledging the potential benefits of stablecoins while highlighting the risks they pose, the BIS is addressing the need for comprehensive oversight and regulatory frameworks.
These recommendations emphasize the importance of authorities’ readiness to regulate and supervise stablecoins, ensuring that they conform to regulatory requirements before launching operations. The BIS also promotes collaboration among authorities at both domestic and international levels to achieve consistent regulatory outcomes.
By promoting consistent and effective regulation, supervision, and oversight of global stablecoin arrangements, the BIS aims to safeguard financial stability. This move towards regulation is crucial in mitigating the risks associated with stablecoins while harnessing their potential benefits for efficient financial services.
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