Crypto-assets and Global “Stablecoins”
Although crypto-assets do not currently pose a material risk to global financial stability, vigilant monitoring is needed in light of the speed of market developments. Should the use of crypto-assets continue to evolve, it could have implications for financial stability in the future. Such implications may include: confidence effects and reputational risks to financial institutions and their regulators; risks arising from direct or indirect exposures of financial institutions; risks arising if crypto-assets became widely used in payments and settlement; and risks from market capitalisation and wealth effects.
Crypto-assets do however raise several broader policy issues, such as the need for consumer and investor protection; strong market integrity protocols; anti-money laundering and combating the financing of terrorism (AML/CFT) regulation and supervision, including implementation of international sanctions; regulatory measures to prevent tax evasion; the need to avoid circumvention of capital controls; and concerns relating to the facilitation of illegal securities offerings. These risks are the subject of work at national and international levels and are outside the primary focus of the FSB’s work.
So-called “stablecoins” are a specific category of crypto-assets which have the potential to enhance the efficiency of the provision of financial services, but may also generate risks to financial stability, particularly if they are adopted at a significant scale. Stablecoins are an attempt to address the high volatility of “traditional” crypto-assets by tying the stablecoin’s value to one or more other assets, such as sovereign currencies. They have the potential to bring efficiencies to payments, and to promote financial inclusion. However, a widely adopted stablecoin with a potential reach and use across multiple jurisdictions (a so-called “global stablecoin” or GSC) could become systemically important in and across one or many jurisdictions, including as a means of making payments.
The emergence of GSCs may challenge the comprehensiveness and effectiveness of existing regulatory and supervisory oversight. The FSB has agreed on 10 high-level recommendations that promote coordinated and effective regulation, supervision and oversight of GSC arrangements to address the financial stability risks posed by GSCs, both at the domestic and international level. They support responsible innovation and provide sufficient flexibility for jurisdictions to implement domestic approaches.
The recommendations call for regulation, supervision and oversight that is proportionate to the risks. Authorities agree on the need to apply supervisory and oversight capabilities and practices under the “same business, same risk, same rules” principle.
The performance of some functions of a GSC arrangement may have important impacts across borders. The recommendations also stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities.
The FSB has agreed to the following further actions as a key building block of theroadmap to enhance cross-border payments commissioned by the G20:
Completion of international standard-setting work by December 2021.
Establishment or, as necessary, adjustment of cooperation arrangements among authorities by December 2021 (and as needed based on market evolution).
At a national level, establishment or, as necessary, adjustment of regulatory, supervisory and oversight frameworks consistent with the FSB recommendations and international standards and guidance by July 2022 (and as needed based on market evolution).
Review of implementation and assessment of how any gaps could be addressed and the need to refine or adapt the FSB recommendations by July 2023.