IOSCO Released A Report That Details Global Stablecoins, Might Overlap Current Securities Regulations

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The board of IOSCO, or the International Organization of Commissions, revealed a report regarding stablecoins as they may overrun the current regulations in the market, as well as several security laws. This said report was published this Monday, March 23rd, and contains 31 pages detailing the regulatory issues surrounding stablecoins as it stresses the dependence on project specifics of jurisdiction and regulation.

The IOSCO dove deep into it by using a stablecoin managed by a specific company’s board of governance, which is then supported by a bunch of global reserve currencies and resting within its very own private Blockchain as an example. For that very specific instance, it could be issued to “authorized participants,” which actively buys and sells the particular stablecoin exclusively. It could only be passed between the exclusive users’ digital wallets as well.

Even though the said report did not single out any specific stablecoins by its actual name, the example they gave looks a whole lot like the Libra project, which is currently led by Facebook.

From this theoretical analysis conducted by the IOSCO, they concluded that such a scheme might indeed fall under the purview of a number of securities regulators.

Due to the fact that the stablecoin may be utilized for payments, such activity that may potentially equate to banking activities and regulated fees, as well as standardized payment frameworks – the report states that if it is indeed adopted at a vast scale, stablecoins could genuinely become systematically essential.

And if the coin project were indeed to nurture and transform into a financial market infrastructure, or FMI, it would then be required to abide by the principles set for FMIs (PFMIs) as dictated by the Bank for International Settlements. This is what IOSCO has to say about that.

Furthermore, the stablecoin’s backup fund and other related interests may equate to different types of securities products based on their specific structures and functions.

The conclusion of the report brought up another potential obstacle in the development and subsequent implementation of stablecoins. This is most especially to those that have the potential to grow and be integral to the infrastructure of financial markets.

IOSCO’s report stated that it would be challenging for some stablecoin that has systematically essential arrangements to rightfully comply with the standards of the PFMI, those that are to some extent or fully decentralized in particular.

That specific challenge may further complicate the road of stablecoin projects in seek of their desired decentralization.

IOSCO then finished up the report by saying that the more decentralized the arrangements may be, the higher the challenge it must undertake.

The interest in stablecoins have surged over the past years

It was back in the fall of 2018 where the digital asset pinned to fiat money or cash, and even other noteworthy assets such as the gold, known as stablecoins graced the headlines of several news outlets. It was also at that time wherein a number of exchanges listed such options for its customers.

Many months after, the mainstream banking behemoths jumped on the bandwagon. Powerhouses, just like the JPMorgan Chase, immediately announced their plans to release their own internal stablecoin-based assets that they call JPM Coin. And now, by the year 2020, central banks all across the world stepped their game up as they now consider the development of central bank digital currencies, or the CBDCs.

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