scorecardresearchCrypto: Global regulators back 'same risk, same regulation' for stablecoins

Crypto: Global regulators back 'same risk, same regulation' for stablecoins

Updated: 13 Jul 2022, 09:53 AM IST
TL;DR.

Stablecoins are cryptocurrencies designed to have a stable value relative to traditional currencies, or to a commodity, to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

Terra stablecoin pricing on the DeFi Llama website on a laptop computer arranged in the Brooklyn borough of New York, US, on Monday, May 16, 2022. The collapse of the Terra ecosystem, and the tokens Luna and UST, will go down as one of the most painful and devastating chapters in crypto history.�Photographer: Gabby Jones/Bloomberg

Terra stablecoin pricing on the DeFi Llama website on a laptop computer arranged in the Brooklyn borough of New York, US, on Monday, May 16, 2022. The collapse of the Terra ecosystem, and the tokens Luna and UST, will go down as one of the most painful and devastating chapters in crypto history.�Photographer: Gabby Jones/Bloomberg

(Reuters) - Major stablecoins must comply with the same safeguards as traditional forms of payments, global regulators said on Wednesday, tightening controls over a battered crypto sector.

Stablecoins are cryptocurrencies designed to have a stable value relative to traditional currencies, or to a commodity, to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

IOSCO, a global body for securities regulators, and a committee at the Bank for International Settlements (BIS), a forum for central banks, said on Wednesday they had formally adopted proposals put out to public consultation last October.

The new guidance shows when existing payment sector rules should apply to large stablecoins, marking a major step forward in applying "same risk, same regulation", they said.

"We expect the same level of robustness and strength in these aspects in systemically important stablecoin arrangements," Ashley Alder, chair of IOSCO and CEO of Hong Kong's securities regulator, said in a statement.

The guidance covers managing risks, governance and transparency standards.

"Recent developments in the cryptoasset market have again brought urgency for authorities to address the potential risks posed by cryptoassets, including stablecoins more broadly," said Jon Cunliffe, chair of the BIS committee and deputy governor of the Bank of England.

TerraUSD stablecoin collapsed earlier this year, while crypto lender Voyager Digital filed for bankruptcy this month.

Bitcoin, the largest cryptocurrency, has slumped some 70% since its November record of $69,000.

Global regulators are set to go further in October when the Financial Stability Board, a global regulatory body which includes IOSCO, proposes "robust" rules for cryptocurrencies more generally.

Global watchdogs are playing catch up with the European Union which this month approved a groundbreaking law to regulate cryptomarkets, including stablecoins.

Britain is due to propose rules to regulate systemically important stablecoins this month as part of a draft law on reforming financial services and markets.

 

First Published: 13 Jul 2022, 09:53 AM IST