IOSCO concluded that "a case-by-case approach is needed to establish which IOSCO Principles and Standards, and national regulatory regimes" apply to proposed stablecoins. IOSCO stated that "a detailed understanding of how the particular proposed stablecoin is expected to operate" is necessary for such a determination. This includes "the rights and obligations it confers on participants and the continuing obligations of the sponsor."
At a Board meeting held on October 30, 2019, IOSCO considered the risks and benefits of stablecoins to the global economy, including impacts on "consumer protection, market integrity, transparency, conflicts of interest and financial crime, as well as potential systemic risks." The IOSCO FinTech Network provided an assessment of global stablecoin initiatives and recommended that IOSCO decide which IOSCO Principles and Standards and national regulatory regimes are applicable to stablecoins on a case-by-case basis.
IOSCO Board Chair Ashley Alder stated that based on how stablecoins are structured (i.e., the disclosure, registration, reporting and liability elements created by sponsors and distributors), IOSCO Principles and Standards may be applicable.
She urged international coordination in order to mitigate risks and actualize benefits associated with stablecoins. Specifically, she explained that IOSCO will (i) work with the Financial Stability Board to address the concerns outlined in a recent G7 report, (ii) continue examining, through its FinTech Network, global stablecoin initiatives, and (iii) encourage information sharing among securities market regulators.
Commentary
Under U.S. law, there is a strong argument that a properly constructed stablecoin is a custodial receipt, not a security. It is unfortunate that the confusion of Libra with stablecoins has muddied these waters. See, e.g., CRS Highlights Benefits and Concerns about Libra.
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