The Bank for International Settlements (BIS), together with the IOSCO group of regulators, have requested that the current rules for major fiat currency settlement and payment services be extended to stablecoins.
The proposal to equate stablecoins with fiat currencies
Reuters reports that the proposal is now being put out for public consultation, but should be finalized by early 2022.
This would implement what regulators have long been calling for, namely that the same rules apply to the same types of assets, deeming stablecoins to be entirely similar to fiat currencies themselves.
The cases of Diem and Tether
A stablecoin operator, such as Tether or even Diem, will have to create a legal entity that explains how it is governed and who manages operational risks such as cyber-attacks.
This aims to oblige stablecoin providers to offer the same guarantees as traditional operators with regard to payments.
One of the main concerns is still related to Facebook’s stablecoin project, as Diem has still not seen the light of day more than two years after its announcement.
There are also other widely used stablecoins already in circulation, the main ones being USDt from Tether, USDC from Circle and Coinbase, and BUSD from Binance.
While they are not yet widely used as alternatives to fiat currencies in payments for purchases for example, they are widely used in cryptocurrency trading. USDt has long been the most widely traded token on crypto markets, more than twice as much as BTC and almost four times as much as ETH.
When it hits the market, Diem will perhaps be used as an alternative to the US dollar for payment purposes, which is why BIS and IOSCO would like to see stablecoins on par with fiat currencies from 2022.
All countries affiliated with IOSCO and BIS would in theory be required to apply the new guidelines as part of their affiliation. This implies that many countries are likely to adhere to these requirements.
IOSCO president Ashley Alder said:
“This report marks significant progress in understanding the implications of stablecoin arrangements for the financial system and providing clear and practical guidance on the standards they need to meet to maintain its integrity”.