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Bitcoin not in focus: G20 to create a framework for stablecoins by 2022

  • The G20 have published report on global stablecoins (GSC) and have reaffirmed their cooperation with World Bank, IMF and others.
  • A new regulatory framework for stablecoins will be implemented in early 2022.

The G20 Financial Stability Board (FSB) has published a report with its recommendations to regulate and supervise stablecoins. The document was created after the publication of a study by the body that qualified stablecoins as a “potential risk” for the world economy. In the newly issued recommendations, the body reiterates its position.

The report qualifies stablecoins as a specific crypto asset with “the potential to improve the efficiency” of the financial market. However, it stresses that their massive adoption presents a risk to the global financial stability. Therefore, the FSB states that it will promote the regulation of this asset class with 10 “high level” recommendations.

The recommendations follow the principle of “same business, same risk, same rules” and seek to maintain the capacity for “responsible innovation” of private entities. At the same time, the body emphasizes the need for domestic approaches to GSC. Furthermore, the FSB stated the following:

The performance of some functions of a GSC arrangement may have important impacts across borders. The recommendations also stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities.

Roadmap and institutional coordination on stablecoin regulation

The report confirms that the FSB has been working with other financial institutions of great relevance to the economic landscape; among others, with the International Monetary Fund, World Bank, FATF, the Banking Supervision Committee (BCBS), the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions (IOSCO). In this way, the body created by the G20 expects to maintain a coordinated and mutual workflow with the above-mentioned entities:

The FSB has, in coordination with relevant international organisations and SSBs, developed a roadmap called for by the G20 to enhance cross-border payments. Authorities are exploring the potential role of new payment infrastructures and, as part of this, concur that appropriate risk management within GSCs, and sound legal underpinnings, as a basis for the use of stablecoins in multiple jurisdictions, constitute one important building block.

According to the roadmap drawn up by the organization, by the end of 2021 or the beginning of 2022 there should be a new regulation on stablecoins. In that period, the institution will make adjustments to the cooperation arrangements it has with other international entities. Furthermore, at the national level, the regulations of the member countries will be adjusted according to the new regulatory framework. By 2023, the agency expects to have made the necessary adjustments:

Beyond 2023 and to keep pace with evolution of GSC arrangements and market developments, the FSB will carry on reviewing its recommendations on a regular basis in order to identify any potential gaps, and update them if needed in order to ensure that they remain relevant and continue to promote effective regulation, supervision and oversight of GSC arrangements across jurisdictions.

The new G20 report is in line with documents issued by the Federal Reserve, the European Union, and other international banking and regulatory institutions. Among the strictest is the Bank of England regulation that prohibits retail investors from investing in Bitcoin derivates.

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Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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