International Regulators Present Guidance Over the Supervision of Stablecoins

The international regulatory community is issuing guidance on the supervision of stablecoins.

The International Organization of Securities Commissions (IOSCO), an international body that aims to bring together the world’s securities regulators, says it wants to provide more clarity to “systemically important” stablecoin arrangements (SAs), as well as the regulators overseeing them.

“With the emergence of stablecoins, the international regulatory community has sought to further understand these new entrants and the potential risks they may pose to the financial system.”

The IOSCO says stablecoins used for money settlements should have little or no credit or liquidity risk. The international body says stablecoins are subject to “run risk” if a specific stablecoin arrangement loses the confidence of its participants.

“In assessing the risk presented by the stablecoin, the SA should consider whether the stablecoin provides its holders with a direct legal claim on the issuer and/or claim on, title to or interest in the underlying reserve assets for timely convertibility at par into other liquid assets such as claims on a central bank, and a clear and robust process for fulfilling holders’ claims in both normal and stressed times.”

 

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