How will Stablecoins be regulated?
Here is our pick of the 3 most important Stablecoin news stories during the week.
It turns out everything is regulated, if it’s not it’s called self regulation, and that is how the stablecoin industry has been up until now. In pure numbers, you would say it has worked well.
Firstly, this week we heard from the Central Bankers Bank, the Bank for International Settlements’ (BIS) which says stablecoin payment systems should comply with international standards for payment, clearing and settlement.
A new report published 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 stablecoin arrangements.
Then there are jurisdictional differences. The Financial Stability Board (FSB) — an international body that monitors and makes recommendations about the global financial system — this month said that countries’ implementation of its recommendations for “global stablecoin” regulations was “still at an early stage” and international coordination was critical to overcoming regulatory arbitrage.
But stablecoins are not just used for payments, they are more than money – they’re programmable money! There’s a difference between the tokens themselves and the issuers. It’s all well and good for Circle to become a bank, for the U.S. government to insure its deposits and for greater transparency across the board. But the rules need to be flexible enough so that they don’t crush the utility of the tokens themselves.
So in summary we have regulators looking to push square pegs into round holes! It’s going to take more time and a lot more thought before we have suitable regulations to this new and innovative asset class.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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