The Financial Stability Board (FSB) published a report Thursday outlining progress made, or lack thereof, by 48 jurisdictions on the “Regulation, Supervision, and Oversight of ‘Global Stablecoin’ Arrangements” since it was first introduced by the global watchdog last year.
The FSB, an international body charged by the G20 for monitoring and making recommendations regarding the stability of the global financial system, said the implementation of its 10 “recommendations” for regulating stablecoin data safeguards from October 2020 was still at an “early stage.”
“Jurisdictions have taken, or are considering, different approaches towards implementing the recommendations,” the FSB said in a statement Thursday. “To address the risk of regulatory arbitrage and harmful market fragmentation and the greater financial stability risks that could arise were stablecoins to enter the mainstream of the financial system, effective international regulatory cooperation and coordination are critical.”
Recommendations range from vesting relevant authorities with regulatory oversight on global stablecoins to a “comprehensive governance framework” as it relates to cryptos pegged 1:1 to a sovereign fiat currency.
The report also highlighted standard-setting bodies, such as the Basel Committee on Banking Supervision and The International Organization of Securities Commissions, which were assessing how existing international standards applied to global stablecoin arrangements, identified a number of “issues” that may not be “fully covered” by ongoing work from countries attempting to regulate stablecoins during a time of increased adoption.
“Ensuring appropriate regulation, supervision, and oversight across sectors and jurisdictions will therefore be necessary to prevent any potential gaps and avoid regulatory arbitrage,” FSB said in its report. “Differing regulatory classifications and approaches to stablecoins at jurisdictional level could give rise to the risk of regulatory arbitrage and harmful market fragmentation.”
The FSB also said authorities had identified several issues relating to the implementation of its recommendations that warranted further consideration. Those include conditions for qualifying a stablecoin as a “global stablecoin” as well as investor protection and other requirements for issuers, custodians, and wallet providers relating to global stabelcoins.
Redemption rights, cross-border cooperation and coordination among jurisdictions, and mutual recognition have also been outlined by regulators, the international body said.
A review of its recommendations, in consultation with other global standard-setting bodies, is expected to be completed in July 2023.
Read more: The US Inches Closer to Stablecoin Rules