What’s New in Stablecoin Regulation?
Just when you thought the stablecoin saga couldn’t get any more exciting, the Bank for International Settlements (BIS) dropped some spicy guidance this past Wednesday. This new guidance revolves around the mystical principle of “same risk, same regulation.” Sounds fancy, doesn’t it? Basically, it means if it looks like a financial duck and quacks like a financial duck, it better be treated like one too.
Who’s Involved?
This guidance is a product of brain power from two major entities: the BIS Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). They have come together to ensure that stablecoin arrangements (SAs) stay on the straight and narrow path when it comes to risk and regulations.
Old but Gold: The Principles for Financial Market Infrastructures
Remember the PFMI? It was first introduced as a response to the 2008 financial crisis. This guidance extends those principles to stablecoin arrangements, meaning that anyone designing or operating an SA should consider these standards in their operations. No news flash here: if you’re moving money, you better do it right!
What Should SA Operators Know?
For those ambitious SA designers out there, here are a couple of things you might want to tweak based on the new guidance:
- Rules and Procedures: Are they tight enough? You might need to beef them up.
- Governance Structures: Make sure your oversight is as solid as your grandma’s fruitcake.
- Risk Management Framework: Riding a rollercoaster? Ensure you’re strapped in and prepared for the drop!
Is Your Stablecoin Systemically Important?
According to these new guidelines, only SAs that are deemed “systemically important” need to comply. So how do you figure out if your SA falls into this elite category? Keep in mind that the definition is complex and factors in elements like usage volume and the potential impact on the financial system.
Not All Guidelines Are Created Equal
The guidance doesn’t prescribe a one-size-fits-all solution. The authors have prioritized elaborating on only four out of the 24 PFMI principles, namely:
- Governance
- Risk Management
- Settlement Finality
- Money Settlements
Don’t worry; a sequel is on the horizon to tackle multicurrency SAs. It’s like a never-ending blockbuster series!
Looking Ahead: More Regulations on the Horizon
This isn’t the end of the road for stablecoin regulations. Other big shots, like the Financial Stability Board, are gearing up to propose their own international regulations for stablecoins as early as October. Meanwhile, U.S. lawmakers are hustling to pass the Stablecoin TRUST Act, aiming to usher these digital coins into the uptight world of traditional finance.
In short, buckle up, crypto enthusiasts! Navigating the world of stablecoins just got a bit more complicated, but the guidance promises to make things a whole lot clearer. Just remember, when in doubt, follow the rules—or at least have a plan for when you don’t!
