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The Bank for International Settlements (BIS) published recommendations concerning the regulation, supervision, and oversight of global stablecoin frameworks in an executive summary dated February 29.
The global financial institution recognized the capacity of stablecoins to improve the efficiency of financial services, while also pointing out the potential risks these assets may pose to financial stability.
Potential Advantages and Risks of Global Stablecoins
Partially defining global stablecoins (GSC) as a stablecoin with “an existing or potential reach and use across multiple jurisdictions and that could become systemically important,” the summary outlined ten essential recommendations for arrangements to “maintain a stable value relative to a specified asset.”
The BIS’s recommendations included thorough oversight of GSC operations and functions, cross-border collaboration, coordination, and information sharing, in addition to establishing authoritative risk management frameworks.
The BIS suggested that authorities work together at both domestic and international levels “to promote consistency in regulatory and supervisory outcomes.”
Significance of Authorities’ “Readiness” to “Regulate and Supervise” Stablecoins
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The executive summary further advised that authorities should sustain “readiness to regulate and supervise global stablecoin arrangements” while stressing “conformance with regulatory, supervisory, and oversight requirements” before initiating operations.
“Authorities should possess and employ the necessary powers and tools, along with sufficient resources, to thoroughly regulate, supervise, and oversee a GSC arrangement and its related functions and activities, and to effectively enforce applicable laws and regulations,” the executive summary stated. “Moreover, these recommendations underscore a technology-neutral approach that emphasizes underlying activities and risks.”
Encouraging “Consistent and Effective” Regulation, Supervision, and Oversight
Established in 1930, BIS functions as “a bank for central banks” with the objective of aiding “central banks’ pursuit of monetary and financial stability through international cooperation.”
The Group of 20 (G20) tasked the Financial Stability Board in 2019 to “examine regulatory issues associated with GSC arrangements and to provide advice on multilateral responses as necessary.” In October of the subsequent year, BIS initially released its “High-level Recommendations for the Regulation, Supervision, and Oversight of Global Stablecoin Arrangements” before ultimately publishing an updated version in July 2023.
BIS indicated that the recommendations “aim to foster consistent and effective regulation, supervision, and oversight of GSCs and stablecoins with the potential to evolve into GSCs across jurisdictions.”
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