BIS issues regulatory recommendations for global stablecoin arrangements

Quick Take

  • The Bank for International Settlements has issued recommendations for the regulation, supervision and oversight of global stablecoin arrangements.

The Bank for International Settlements has proposed recommendations for regulating global stablecoins.

In a summary of recommendations issued on Thursday, the BIS described GSCs as widely adopted stablecoins with a potential reach and use across multiple jurisdictions. "A GSC could become systemically important in and across one or many jurisdictions," the BIS said. 

Recommendations for GSC arrangements

The BIS summary outlined key recommendations that aim to address financial stability risks posed by GSCs on both the domestic and international levels.

The recommendations also aim to support GSC innovation and provide flexibility for jurisdictions to implement domestic approaches. 

Some of the key recommendations call on global jurisdictions to be ready to regulate and supervise global stablecoin arrangements, with a focus on cross-border cooperation, coordination and information sharing.

Risk management recommendations

The recommendations outline priorities for global authorities to ensure that GSC risk management frameworks are effective.

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"Risk management frameworks should be in place that comprehensively address all material risks associated with their functions and activities, especially with regard to operational resilience, cyber security safeguards and anti-money laundering/countering the financing of terrorism measures, as well as 'fit and proper' requirements, if applicable, and consistent with jurisdictions’ laws and regulations," the BIS added.

Key areas of the recommendation summary also focus on data storage and access to data, redemption rights and prudential requirements.

In its summary, the BIS said that although stablecoins have the potential to enhance the efficiency of how financial services are provided, "they may also generate risks to financial stability."

"The recommendations seek to promote consistent and effective regulation, supervision and oversight of GSCs and stablecoins with the potential to become GSCs across jurisdictions. In addition, these recommendations emphasize a technology-neutral approach that prioritizes underlying activities and risks," the BIS added.


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About Author

Brian McGleenon is a UK-based markets reporter for The Block. He has worked as a financial journalist and producer for multiple news outlets over the years, such as Fuji Television, The Independent, Yahoo Finance, The Evening Standard, and The Daily Express. Brian is also a screenwriter and producer with one feature film produced and one in development with Northern Ireland Screen. Apart from web3 and cryptocurrency developments, he is also interested in geopolitics, environmental issues, artificial intelligence, and longevity research. Get in touch via email [email protected].

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