On 7 October 2021, the Financial Stability Board (FSB) published a progress report setting out the progress made on the implementation of its high-level recommendations for the regulation, supervision and oversight of global stablecoin arrangements.  The progress report incorporates the results of a stocktake of the implementation of the FSB’s high level recommendations in 21 advanced economies and 27 emerging market and developing economies.

The high level recommendations are set out in an FSB report ‘Regulation, supervision and oversight of global stablecoin arrangements: final report and high-level recommendations’ which was published in October 2020.

The recommendations are addressed to authorities and focus on privately issued global stablecoins predominately intended for retail use. Although the recommendations are aimed at global stablecoins, they could be used for other stablecoins, including those that may pose risks to financial stability only in some countries or regions, and, potentially, other crypto-assets that could pose risks similar to some of those posed by global stablecoins because of comparable international reach, scale and use.

The recommendations call for regulation, supervision and oversight that is proportionate to the risks, and stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities that take into account the evolving nature of global stablecoin arrangements and the risks they may pose over time.

Key points in the progress report include:

  • Whilst the current generation of so-called stablecoins are not being used for mainstream payments on a significant scale, vulnerabilities in this space have continued to grow over the course of 2020-21.
  • Jurisdictions have taken or are considering different approaches towards implementing the FSB’s high-level recommendations.
  • As jurisdictions are using the FSB high-level recommendations in developing their own domestic regulatory approaches, authorities have identified several issues relating to the implementation of the recommendations that may warrant further consideration and where further work at international level could be useful. Areas for further consideration that respondents identified as most useful include conditions for qualifying a stablecoin as a global stablecoin; prudential, investor protection, and other requirements for issuers, custodians, and providers of other global stablecoin functions (e.g., wallet providers); redemption rights; cross-border and cross-sectoral cooperation and coordination; and mutual recognition and deference.

The FSB will undertake a review of its recommendations. The review, which will be completed in July 2023, will identify how any gaps could be addressed by existing frameworks and will lead to the update of the FSB’s recommendations if needed.