LONDON: Global regulators said on Wednesday that major stablecoins must adhere to the same security standards as conventional forms of payment, tightening controls over the battered cryptocurrency industry.
In order to avoid the volatility that renders bitcoin and other digital tokens unsuitable for the majority of commerce, stablecoins are cryptocurrencies that are designed to have a stable value relative to conventional currencies, or to a commodity.
A committee at the Bank for International Settlements (BIS), a forum for central banks, and IOSCO, a global organisation for securities regulators, announced on Wednesday that they had officially adopted recommendations made available for public comment in October.
According to them, the new guidance represents a significant advancement in the concept of “same risk, same regulation” by indicating when current payment sector regulations should be applied to large stablecoins.
Ashley Alder, chair of IOSCO and CEO of the securities regulator in Hong Kong, stated in a statement, “We expect the same level of robustness and strength in these aspects in systemically important stablecoin arrangements.”
Standards for governance and transparency are covered in the guidance.
According to Jon Cunliffe, chair of the BIS committee and deputy governor of the Bank of England, “recent developments in the cryptoasset market have again brought urgency for authorities to address the potential risks posed by cryptoassets, including stablecoins more generally.”
The TerraUSD stablecoin failed earlier this year, and this month, cryptocurrency lender Voyager Digital declared bankruptcy.
The largest cryptocurrency, Bitcoin, has fallen roughly 70% since hitting a record high of $69,000 in November.
When the Financial Stability Board, an international regulatory body that includes IOSCO, proposes “robust” rules for cryptocurrencies more generally in October, global regulators are expected to take further action.
The European Union, which this month approved a ground-breaking law to regulate cryptomarkets, including stablecoins, is ahead of the game while international watchdogs are playing catch-up.As part of a draught law on reforming financial services and markets, Britain is expected to propose regulations for stablecoins this month.
