Global securities and banking regulators said on Wednesday that stablecoins must adhere to the same safety regulations as other traditional forms of payments.
Stablecoins are cryptocurrencies that have a stable value relative to traditional currencies, or to a commodity. Bitcoin and other digital tokens, on the other hand, are impractical for most commerce because of their volatility.
The International Organization for Securities Commissions (IOSCO), a global body for securities regulators, and a panel at the Bank for International Settlements (BIS), a forum for central banks, said they have formally adopted proposals put out to public consultation last October.
The new guidance shows when existing payment sector rules should apply to large stablecoins, marking a major step forward in applying “same risk, same regulation”, they said.
“We expect the same level of robustness and strength in these aspects in systemically important stablecoin arrangements,” Ashley Alder, chair of IOSCO and CEO of Hong Kong’s securities regulator, said in a statement.
Risk, Governance and Transparency Standards
The guidance covers managing risks, governance and transparency standards.
“Recent developments in the crypto-asset market have again brought urgency for authorities to address the potential risks posed by crypto-assets, including stablecoins more broadly,” Jon Cunliffe, chair of the BIS committee and deputy governor of the Bank of England, said.
Bitcoin, the largest cryptocurrency, has slumped some 70% since hitting a record high of $69,000 in November.
Global regulators are set to go further in October when the Financial Stability Board, a global regulatory body which includes IOSCO, proposes “robust” rules for cryptocurrencies more generally.
Global watchdogs are playing catch up with the European Union which this month approved a groundbreaking law to regulate cryptomarkets, including stablecoins.
Britain is due to propose rules to regulate systemically important stablecoins this month as part of a draft law on reforming financial services and markets.
- Reuters with additional editing by Jim Pollard