Sunday, 14 July 2024

Crypto News

Obligatory license for stablecoins? What do the latest FSB guidelines mean

Obligatory license for stablecoins? What do the latest FSB guidelines mean

Normally, the numerous reports published by the Financial Stability Board (FSB) don’t contain particularly bold suggestions. 

The international monitoring body, comprised of financial authority representatives from the 20 largest economies of the world (G-20), the FSB limits its scope to risk analysis, not bothering itself with a global vision for economic development.

However, the latest set of crypto guidelines, crafted by the FSB for local and global regulators, contain some rather rigid propositions.

Perhaps the most outstanding of them is the demand for every stablecoin issuer to obtain a local license before any operations in a particular jurisdiction. Until now, such a procedure was familiar to crypto platforms, conducting numerous functions, starting with custody and exchange. And even those providers are still struggling to get their permission in the majority of national jurisdictions. So what could such demand mean for stablecoin providers?

What exactly do the new guidelines suggest?

On July 17, the FSB suggested a global regulatory framework for crypto, divided into two sets of recommendations. One of them — high-level recommendations for regulating crypto in general — didn’t contain any huge surprises.

The Board proposed to follow the principle of “same activity, same risk, same regulation” and oblige crypto platforms to comply with some basic, much-discussed rules: Segregate clients’ digital assets from their own funds and separate functions. It also noted that regulations won’t be effective until authorities can collaborate fully across jurisdictions.

High-level recommendations for the “Regulation, Supervision and Oversight of Global Stablecoin Arrangements” bring more vivid suggestions. The FSB starts from the definition of “global stablecoin” (GSC) — a coin, that serves as a means of payment and storage and has the potential for adoption across multiple jurisdictions. As GSCs potentially have a huge impact on the economy, any national regulator, according to FSB, should:

“Have and utilise the powers and capabilities to, as applicable, regulate, supervise, oversee and, if necessary or appropriate, effectively prohibit stablecoin activities being conducted and stablecoin services being offered to users in or from their jurisdiction.”

To exert that kind of control, the local authorities should demand from GSC providers a “governance framework.” In particular, this would include a “governance body,”…

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