The opportunities offered by distributed ledger technology (DLT) and crypto-assets are enormous. They have the potential to transform an outdated financial system, particularly in cross-border payments, and to improve financial inclusion and access to finance for SMEs.
The increasing uptake and proliferation of crypto-assets, and specifically stablecoins, has drawn the attention of policymakers and regulators globally.
A new regulatory framework will provide much needed legal clarity to the sector. It will provide a positive impact on the industry, giving rise to a better ecosystem, stronger investor confidence and, ultimately, higher demand for this game-changing asset class.
It is important the regulatory framework being developed across multiple jurisdictions, engages with lawmakers to avoid regulatory inconsistencies between regions.
Globally, the Financial Stability Board [FSB] is focussing on the opportunities and risks of (global) stablecoins. This is because stablecoins could create risks for financial stability and become systemically important when adopted on a large scale. They could challenge the comprehensiveness and effectiveness of existing regulatory and supervisory oversight.
The FSB states that individual jurisdictions should implement and use appropriate powers and tools to supervise and potentially prohibit stablecoin activities. This could cover market participants whose activities and services include: control of stablecoins, provide market infrastructure, issuing and redeeming stablecoins; managing stablecoin reserve assets; custody or trust services; reserve assets; trading and exchanging stablecoins; and storing the keys providing access to stablecoins.
Stablecoin service providers will be treated the same as similar financial market participants under existing regulations. This includes: rules for e-money issuers; remittance companies; financial market infrastructures including payment systems; collective investment schemes; deposit-taking and securities trading activities; market integrity; consumer and investor protection arrangements; pre and post-trade transparency obligations; disclosure requirements; and settlement finality.
The FSB aims to finalise international standard-setting by December 2021.