Financial regulators around the world are taking a growing interest in the regulation of stablecoins. The U.S. is creating federal-level systems for stablecoin issuers. China's central bank is concerned that private stablecoins could hurt financial systems. Last month, the head of the European Central Bank, Christine Lagarde, said that stablcoins are not a currency, but assets, requiring appropriate regulation.
The Bank for International Settlements (BIS) also recently published a report in cooperation with the International Organization of Securities Commissions (IOSCO). It includes preliminary guidance on the application of the Financial Market Infrastructure Principles (PFMI) to StableCoin agreements.
The guidance does not create additional standards for stablecoin agreements, which the European Central Bank considers to be payment systems "because they permit the transfer of value between stablecoin holders." The document also considers risk assessment. For example, when the arrangements for stablecoins relate to the assessment of stablecoin risk, it should be noted whether stablecoin provides its holders with a direct legal claim on the issuer, as well as ownership of the underlying reserve or an interest in it.
The BIS is rather probing the field. Why is that? Well, it's because the press statement points to the ability for each jurisdiction to independently allow (or prohibit) stablecoin activity in its region.
The report offers guidance on these types of stablecoin agreements according to four key principles:
- risk management,
- settlement finality (assurance that the transaction has been completed without risk of cancellation),
- monetary settlement.
Thus, the Bank for International Settlements, like other financial regulators, seeks to make StableCoin payment systems compliant with international payment, clearing, and settlement standards.