The Bank for International Settlements (BIS), together with the group of regulators IOSCO – the International Organization of Securities Commissions, which regulates global securities and futures markets – have requested the extension of existing settlement and payment services rules for major fiat currencies to stablecoins .
Proposal to extend the rules for fiat currencies to stablecoins
Reuters reports that the proposal is now being submitted for public consultation, but should be completed in early 2022.
This would implement what regulators have long demanded, namely that the same rules apply to the same assets, then it would treat stablecoins very much like fiat currencies themselves.
A stablecoin operator such as Tether or Diem, for example, will need to create a legal entity that explains how it is managed and who manages operational risks, such as cyber attacks. The aim is to force stablecoin providers to offer the same guarantees as traditional operators when it comes to payments.
One of the main concerns is still related to Facebook’s stablecoin project, due to its broad user base. Diem, more than two years after his announcement, still did not see the light of day.
Other widely used stablecoins are already in circulation, the main ones being USDT from Tether, USDC from Circle and Coinbase and BUSD from Binance.
Although they are not yet widely used as alternatives to fiat currencies, for example in payments for shopping, they are widely used in the trade in cryptocurrencies. The USDT has long been the most widespread token in the crypto markets, more than twice as much as BTC and almost four times as much as ETH.
Stablecoin Diem, once launched, may be used as an alternative to the US dollar for payment purposes, so BIS and IOSCO would like to see stablecoins at the same level as fiat currencies from 2022. All countries associated with IOSCO and the BIS would theoretically have to apply the new directives as part of their jurisdiction. This means that many countries are likely to comply with these requirements.
IOSCO President Ashley Alder said:
“This report represents a significant step forward in understanding the implications of linking stablecoins to the financial system and provides clear and practical guidance on the standards they must meet to maintain their integrity.”