CPMI and IOSCO Consult on Stablecoins
- CPMI and IOSCO call for comments on new consultation report confirming that the Principles for Financial Market Infrastructures (PFMI) apply to systemically important stablecoin arrangements (SAs).
- The report proposes additional guidance on how certain aspects of the PFMI apply to the novel features of SAs.
- CPMI and IOSCO may further examine regulatory, supervisory and oversight issues associated with SAs and coordinate with other standard-setting bodies.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published for public consultation preliminary guidance that confirms and clarifies that stablecoin arrangements should observe international standards for payment, clearing and settlement systems.
The Committee on Payments and Market Infrastructures and @IOSCOPress propose that stablecoins used as a settlement asset in a systemically important payment arrangement should have minimal credit or liquidity risk; sets out factors for consideration https://t.co/39WBf38mUM pic.twitter.com/nmd9MpIuQ5
— Bank for International Settlements (@BIS_org) October 6, 2021
“The payments landscape has undergone rapid transformation in recent years and continues to evolve at pace. This is happening at the same time as financial innovation offers the prospect of new payment services and greater competition in payments but also potential risks to the financial system. This consultation document is part of an ongoing commitment by the international regulatory community to ensure the principle of ‘same risk, same regulation’, to identify potential risks and to help develop appropriate oversight to safeguard financial stability.”
In 2019, the Group of Seven and the Financial Stability Board (FSB) conducted work on the impact of global stablecoin arrangements and made recommendations for their regulation, supervision and oversight.
Preliminary analysis conducted by CPMI-IOSCO as part of an October 2020 FSB report found that “the PFMI apply to stablecoin arrangements that perform systemically important payment system functions or other financial market infrastructure (FMI) functions”.
The consultation paper – Application of the Principles for Financial Market Infrastructures to stablecoin arrangements – upholds and confirms that determination. Given the novelty and complexity of stablecoin arrangements, it provides clarification and interpretation through the provision of guidance on applying existing standards to SAs, including to some of the novel features of SAs which distinguish them from other payment systems.
“This report marks significant progress in understanding the implications of stablecoin arrangements for the financial system and providing clear and practical guidance on the standards they need to meet to maintain its integrity. We look forward to receiving submissions to further enhance our insights and recommendations.”
Each jurisdiction retains the prerogative to determine within its own context whether to allow stablecoin activity. If it does so, and if an SA is systemic or is likely to become systemic, then the PFMI (supplemented by the report’s guidance) would also apply.
The CPMI and IOSCO invite comments on this consultative document generally and the questions set out in the document specifically.
Responses will be published on the websites of the CPMI and IOSCO unless respondents expressly request otherwise. Commercial or other sensitive information should not be included in your submission or may be provided with redactions by the sender for publication.
The CPMI and IOSCO may further examine regulatory, supervisory and oversight issues associated with SAs and, as appropriate, coordinate with other standard-setting bodies to address outstanding gaps. This report is a key contribution to the G20 roadmap on cross-border payments and supports the FSB’s work in this area.
Some issues identified in this report may require further clarification and follow-up work in 2022 and beyond as the features of certain projects and SA functions evolve.
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