FSB put forward ten recommendations to promote the unified, effective supervision and supervision of GSC. The purpose of the proposal is to help supervisory authorities determine supervisory methods to mitigate potential risks that GSC may pose to financial stability, market integrity, and users (consumers), and promote financial innovation at the same time. These recommendations focus on strengthening existing standards and regulations, identifying and addressing possible regulatory gaps, while reducing potential regulatory arbitrage. Ten recommendations in the FSB report are:
First, regulators should possess and use necessary powers and tools and sufficient resources to comprehensively supervise global stablecoin projects and their various activities, and effectively implement relevant laws and regulations.
Second, regulatory agencies should functionally apply regulatory requirements commensurate with their risks to global stablecoin projects, targetedly supervise the links that may cause risks, and at the same time supervise in accordance with the principle of “same business, same risk, and same rule”. Christine Lagarde of the European Central Bank (ECB) calls this principle the “golden rule of supervision”. This means that cryptocurrency issuers can no longer operate in the gray area, and stablecoins must compete in a level playing field and comply with the same rules as banks, electronic currency issuers, and large payment processors.
Third, various regulatory agencies should ensure comprehensive supervision and supervision of cross-border and cross-departmental stablecoin projects and cooperate and coordinate with each other both domestically and internationally. FSB emphasizes the need for global unification in the methods of regulation and supervision of stablecoins. The reason for discussion at the highest level of global economic governance is to reduce the risk of “regulatory arbitrage”.
Fourth, regulators should ensure that the global stablecoin project has established a comprehensive governance framework and clearly assign responsibilities of the functions and activities within the GSC project. The governance structure and accountability system should have a sound legal basis, and should be clear, transparent and disclosed to users and other stakeholders.
Fifth, regulators should ensure that global stablecoin projects have an effective risk management framework, especially in reserve management, operational resilience, cyber security, AML/CFT measures, and “other appropriate” requirements. The supervisory authority shall ensure that appropriate policies are developed for the GSC project, clarifying how all functions and activities within the project are subject to risk management measures commensurate with the specific risks.
Sixth, regulators should ensure that the global stablecoin project establishes a sound system to protect, collect, store, and manage data. GSC companies should provide G20 with channels for timely and unimpeded access to all stablecoin transactions and user-related data and information. This puts forward technical requirements for GSC projects and requires the protection of user data privacy.
Seventh, regulators should ensure that GSC projects have appropriate recovery scheme and solutions. The supervisory authority shall ensure that the GSC project has developed an appropriate plan to support the orderly liquidation or reorganization under the applicable legal (or bankruptcy) framework, including the continuity or recovery of any key functions and activities within the GSC project.
Eighth, the regulatory authority should ensure that the GSC project provides users and relevant stakeholders with comprehensive and transparent information to understand its functions, stability mechanisms, governance structure, etc.
Ninth, the regulatory authority should ensure that the GSC project provides users with the enforceability of the redemption rights and the legal clarity of the redemption procedures. Regulators should ensure that the GSC project provides users with valid information about redemption of fiat currency assets, as well as any claims that users and intermediaries may make against the underlying reserve assets or against the issuer or guarantor, including enforceable information on how the creditor’s rights go bankrupt or reorganized.
Tenth, regulatory authorities should ensure that GSC projects meet all applicable regulatory requirements in specific jurisdictions before starting operations. GSC projects and activities shall meet the approval requirements (such as permits or registrations) for establishing mechanisms within their jurisdiction, otherwise the authorities shall not allow the operation of GSC projects within their jurisdiction.
