The Bank for International Settlements (BIS) has conducted a survey of 11 jurisdictions and found that the use of stablecoins is being hindered by regulatory fragmentation on a global scale. The BIS publication emphasized the urgent need for stablecoin regulation, but also highlighted the risks posed by the diversity of regulatory approaches in integrating stablecoins into the international financial system.
According to the report, most regulatory approaches share similarities in terms of authorizing issuers, reserve requirements, risk management, and anti-money laundering measures. However, differences arise in the structuring of stablecoin issuances, resulting in them being regulated under various frameworks such as banking, securities, commodities, or payment systems.
The report also highlighted discrepancies in regulations, redemption policies, and the definition of stablecoins. For instance, some jurisdictions treat algorithmic stablecoins, which are not tied to external assets, in the same way as fiat-pegged stablecoins. However, the United Kingdom, Japan, and Singapore have separate regulations for algorithmic stablecoins, while certain jurisdictions in the United Arab Emirates have banned them outright. Reserves may also need to be segregated differently, placed under the custody of custodians with varying requirements, or, in the case of the UK, placed in a statutory trust. There are also variations in audit and liquidity requirements.
On the other hand, technological and cybersecurity requirements tend to be more consistent across jurisdictions. The report suggests that further exploration is needed regarding the interaction of stablecoins with central bank digital currencies, tokenized deposits, and other digital assets.
This report is in line with the recommendations on stablecoin regulation that the BIS released in February. The BIS urged governments to collaborate and address issues related to disclosure, risk management, redemption, and other areas.
Other international bodies, such as the International Monetary Fund, Financial Stability Board, Financial Action Task Force, Basel Committee on Banking Supervision, and International Organization of Securities Commissions, also have policies on stablecoins that they aim to promote.
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