In an executive summary published on February 29, the Bank for International Settlements (BIS) made proposals for the management, control, and supervision of global stablecoin arrangements.

Although the international financial institution recognized that stablecoins may improve the effectiveness of financial services, they also emphasized that there could be risks associated with the assets that could jeopardize financial stability.

Possible Advantages and Dangers of International Stablecoins

In addition to providing a definition of global stablecoins (GSCs) as stablecoins with “an current or potential reach and use across several jurisdictions and that could become systemically important,” the overview of GSCs included ten critical suggestions for configurations aimed at ensuring that their value remains stable regarding a designated asset.

BIS recommended having authoritative risk management frameworks, cross-border collaboration, coordination, and information sharing, as well as thorough control of GSC operations and functions.

“Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication, information sharing and consultation in order to support each other in fulfilling their respective mandates and to ensure comprehensive regulation, supervision and oversight of a GSC arrangement across borders and sectors, and to encourage consistency of regulatory and supervisory outcomes,” BIS stated.

Authorities’ “Readiness” to “Regulate and Supervise” Stablecoins Is Crucial

In addition, the executive summary stressed the importance of “conformance with regulatory, supervisory, and oversight requirements” before launching operations and urged authorities to remain “ready to regulate and supervise global stablecoin arrangements.”

The executive summary stated that in order to successfully implement applicable laws and regulations and to thoroughly regulate, supervise, and oversee a GSC arrangement and its related tasks and activities, authorities must possess and make use of the necessary tools, powers, and resources. Furthermore, these suggestions stress a technology-neutral strategy that gives underlying activities and dangers priority.

Encouraging “Consistent and Effective” Regulation, Monitoring, and Supervision

BIS was established in 1930 with the goal of assisting “central banks’ pursuit of monetary and financial stability through international cooperation.” It is known as “a bank for central banks.”

In 2019, the Financial Stability Board received a directive from the Group of 20 (G20) to “examine regulatory issues raised by GSC arrangements and to advise on multilateral responses as appropriate.” Before releasing a revised version in July 2023, BIS first published its “High-level Recommendations for the Regulation, Supervision, and Oversight of Global Stablecoin Arrangements” in October of the following year.

“Seek to promote consistent and effective regulation, supervision and oversight of GSCs and stablecoins with potential to become GSCs across jurisdictions,” according to BIS, is how the recommendations are put forth.