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Bank for International Settlements Releases Executive Summary of Global Stablecoin Recommendations

The Bank for International Settlements (BIS) issued guidance on February 29 concerning the control, monitoring, and management of global stablecoin systems, as outlined in an executive summary.

Acknowledging the potential benefits of stablecoins in improving financial service efficiency, the international financial body also underscored the inherent risks these assets might pose to financial stability.

Potential Benefits and Risks of Global Stablecoins

Describing global stablecoins (GSC) as stablecoins with the capacity to be utilized across various jurisdictions and potentially attain systemic significance, the summary outlined ten pivotal suggestions for ensuring these arrangements uphold a stable value relative to a designated asset.

Among the recommendations by BIS were thorough supervision of GSC operations and functionalities, fostering cross-border collaboration, coordination, and data exchange, and establishing robust risk management structures.

BIS proposed that authorities collaborate domestically and internationally to promote uniformity in regulatory and supervisory outcomes.

Importance of Authorities’ “Readiness” to “Regulate And Supervise” Stablecoins

The executive summary additionally advised that authorities should be prepared to regulate and supervise global stablecoin arrangements, stressing adherence to regulatory, supervisory, and oversight standards before commencement of operations.

“Authorities must possess and deploy appropriate powers, tools, and sufficient resources to thoroughly regulate, supervise, and oversee a GSC arrangement along with its associated functions and activities, and to enforce pertinent laws and regulations effectively,” the executive summary stated. “Furthermore, these recommendations highlight a technology-neutral approach that prioritizes underlying activities and risks.”

Promoting “Consistent And Effective” Regulation, Supervision And Oversight

Established in 1930, the Bank for International Settlements (BIS) functions as a central bank for central banks, dedicated to facilitating international cooperation in support of central banks’ efforts to achieve monetary and financial stability.

In 2019, the Group of 20 (G20) tasked the Financial Stability Board with examining regulatory concerns associated with global stablecoin (GSC) arrangements and providing guidance on appropriate multilateral responses. Subsequently, in October of the following year, BIS initially published its “High-level Recommendations for the Regulation, Supervision, and Oversight of Global Stablecoin Arrangements,” followed by an updated version in July 2023.

BIS has articulated that these recommendations aim to foster uniform and effective regulation, supervision, and oversight of GSCs and stablecoins with the potential to attain global significance across various jurisdictions.

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