The Bank for International Settlements (BIS) has conducted a survey of 11 jurisdictions and found that the use of stablecoins is hindered by international regulatory fragmentation, despite their initial promise. The publication emphasized the “urgent” need for stablecoin regulation, but highlighted the risks posed by the diversity in regulations when it comes to integrating stablecoins into the international financial system.
According to the report, most regulatory approaches are similar in terms of authorizing issuers, reserve requirements, risk management, and Anti-Money Laundering (AML) measures. However, differences in the structuring of stablecoin issuances can result in them being regulated under different frameworks such as banking, securities, commodities, or payment systems.
There are also variations in the specifics of regulations, redemption policies, and the definition of a stablecoin. For instance, some jurisdictions regulate algorithmic stablecoins, which are not pegged to external assets, in the same way as fiat-pegged stablecoins. However, the United Kingdom, Japan, and Singapore have separate regulations for algorithmic stablecoins, while jurisdictions in the United Arab Emirates have completely banned them. The report noted that reserves may have to be segregated differently, placed in the hands of custodians with varying requirements, or, in the case of the U.K., placed in a statutory trust. Audit and liquidity requirements also vary significantly.
On the other hand, technological and cybersecurity requirements tend to be more consistent. However, further exploration is needed to understand the interaction between stablecoins and central bank digital currency, tokenized deposits, and other digital assets.
The report aligns with the BIS recommendations on stablecoin regulation that were released in February. BIS called for governments to collaborate and address issues related to disclosure, risk management, redemption, and other matters.
Various international bodies, such as the International Monetary Fund, Financial Stability Board, Financial Action Task Force, Basel Committee on Banking Supervision, and International Organization of Securities Commissions, also have policies on stablecoins that they aim to advance.
In other news, The DeFi bots are boosting the volume of Solana’s stablecoin.