BIS and IOSCO issue guidelines on stablecoin regulations

The ten-year-old PFMI guidelines will apply to the stablecoin arrangements that transfer stablecoins

By Shashank Bhardwaj

Image: Shutterstock

The publication of fresh guidance on stablecoin arrangements (SAs) on Wednesday provided additional evidence that the idea of ‘same risk, same regulation’ applied to crypto assets. The guidelines, released by the International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS), apply the Principles for Financial Market Infrastructures (PFMI) to systemically important SAs that transfer stablecoins.

The document extends the PFMI standards to SAs without creating additional standards and is designed for use by SA designers and operators. It says, "An SA may need to make changes to its rules, procedures, governance arrangements and risk management framework, taking the guidance into consideration in order for its practices to be consistent with the PFMI."

The guidelines describe a stablecoin arrangement as "an arrangement that combines a range of functions to offer an instrument that purports to be used as a means of payment and/or store of value.” Since only SAs that are "systemically important" are covered by it, the guidance suggests factors to consider when evaluating which SAs it applies to.

The PFMI was developed and released in 2012 in response to the financial crisis of 2008. The revised guidelines state that all requirements apply to SAs, but only four of the 24 principles and essential considerations—governance, risk management, settlement finality, and money settlements—were elaborated on by the writers. They mentioned the release of a separate work to address multicurrency SAs.

In a statement released on Wednesday, Caroline D. Pham, a commissioner with the United States Commodity Futures Trading Commission and co-chair of the CPMI-lOSCO Policy Standing Group, said that the report was a significant step toward establishing global standards for stablecoin arrangements and a unified regulatory framework that protects the world financial system.

There are other entities working on stablecoin regulation. The Stablecoin TRUST Act has been introduced in the United States to control stablecoin and include them into the financial system. In October, the Financial Stability Board is anticipated to suggest a global standard for stablecoins.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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