BIS explains how Stablecoins could meet international monetary standards

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The Bank for International Settlements (BIS) states that stablecoin payment systems must comply with international standards for payment, clearing and settlement.

A new report released on Wednesday by the BIS Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) includes preliminary guidance on how to apply the Principles for Financial Market Infrastructures (PFMI) to stable coin agreements.

CPMI and IOSCO invited the public for general comments and to respond to a series of questions set out in the report clarity document. Responses can be emailed to CPMI ([email protected]) and IOSCO ([email protected]) Secretariats before December 1st.

Financial regulatory agencies around the world are showing increasing interest in the regulation of stablecoins. The United States is working to create a framework at the federal level for stablecoin issuers. China’s central bank fears that private stablecoins may unbalance financial systems. Last month, European Central Bank Director Christine Lagarde said stablecoins are not currencies but assets, and should be regulated accordingly.

The published guidelines are not intended to create additional standards on stablecoin agreements which, according to the European Central Bank, are payment systems “as long as they allow the transfer of value between stablecoin holders.” The guidelines apply to systemically important stable coin agreements and to regulators that follow the BIS recommendations, the report said. Systemically important financial institutions are those whose failure can trigger a financial crisis.

The report offers advice on these types of stablecoin arrangements based on four key principles: governance, risk management, settlement purpose (the certainty that a transaction has been completed without risk of cancellation) and settlements. cash.

“A stablecoin used by a systemically important system [stablecoin arrangement] for cash settlements should have little or no credit or liquidity risk, ”says the report under cash settlement guidelines.

The report goes on to say that when stablecoin deals assess a stablecoin’s risk, it should be noted whether the stablecoin provides its holders with a direct legal claim on the issuer as well as “the title or interest in the reserve. underlying assets for timely convertibility at par into other liquid assets.

A BIS press release said that each jurisdiction can decide whether or not to allow stablecoin activity. If it allows, and if the deal is or has the potential to be systemic, then the PFMI would apply in accordance with published instructions, the statement said.

Noting that the characteristics and functions of stablecoin agreements could evolve, some issues in the report may require further clarification and study in the coming years, according to the BIS statement.

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