FSB reports on regulation, supervision and oversight of global stablecoin arrangements

The Financial Stability Board (FSB)  has published a progress report on the implementation of its high-level recommendations on the regulation, supervision and oversight of “global stablecoin” arrangements.

The key elements of the report includes:

• a discussion of the key market and regulatory developments since the publication of the FSB high-level recommendations in October 2020;
• taking stock of the implementation of the FSB high-level recommendations across jurisdictions;
• a description of the status of the review of the existing standard-setting body (SSB) frameworks, standards, guidelines and principles in light of the FSB high-level recommendations; and
• the identification of the areas for consideration for potential further international work.

The report notes that:

• jurisdictions have taken different approaches towards implementing the high-level recommendations giving rise to the risk of regulatory arbitrage and harmful market fragmentation;
• standard-setting bodies, including BCBS, CPMI, and IOSCO are assessing whether and how existing international standards and principles may apply to stablecoin arrangements and adjusting them in light of the FSB high-level recommendations.

The report also stresses that a number of issues may not be fully covered by existing standards and principles and that gaps should be addressed in a holistic manner that is coordinated across sectors.

Issues relating to the implementation of the recommendations that may warrant further consideration and where further work at international level include:

• conditions for qualifying a stablecoin as a global stablecoin;
• prudential, investor protection, and other requirements for issuers, custodians, and providers of other global stablecoin functions (e.g. wallet providers);
• redemption rights; cross-border and cross-sectoral cooperation and coordination; and mutual recognition and deference.

The FSB will undertake a review of its recommendations (which will be completed in July 2023) in consultation with other relevant SSBs and international organisations to identify how gaps could be addressed by existing frameworks that may lead to the update of the FSB’s recommendations.