The International Organisation of Securities Commissions (IOSCO) has backed other international bodies’ warnings of the dangers of propsoed “stablecoins” such as Facebook’s Libra, but also highlighted the projects’ possible benefits.
Stablecoins are a form of cryptocurrency tied to national or international assets such as currencies or commodities.
Each initiative should be analysed on a case-by-case basis to determine which existing regulations apply as well as where regulatory gaps may exist, IOSCO said on Monday.
The group’s comments follow a meeting last week in Madrid at which regulators considered stablecoins’ risks and benefits.
The discussions were supported by an assessment produced by IOSCO’s Fintech Network, which concluded that each stablecoin proposal should be considered on its own merits.
“A detailed understanding of how the particular proposed stablecoin is expected to operate is therefore needed, including the rights and obligations it confers on participants and the continuing obligations of the sponsor,” IOSCO said in a statement.
The remarks from IOSCO, which represents securities regulators from across the world, including the US, Europe and Japan, follow warnings by governments and financial authorities of the risks posed by Libra, which Facebook announced earlier this year and plans to launch in 2020.
IOSCO said it agrees that stablecoins with a potentially global footprint could pose risks in areas including consumer protection, financial crime and systemic risks, but it also highlighted the potential benefits of the projects if appropriate regulatory arrangements can be made.
That contrasts with the positions of counties such as Germany and France, which have said they want to prevent Libra from launching at all.
IOSCO chair Ashley Alder said he agreed with bodies such as the G20 that have highlighted the “serious” risks of global stablecoins.
“We therefore encourage international collaboration, so the risks relating to stablecoins can be identified and mitigated, and the potential benefits realised,” he said.
He said IOSCO would participate “fully” in the Financial Stability Board’s work on the issue and would coordinate with other standards-setting bodies on a unified response.
“It is important that those seeking to launch stablecoins, particularly proposals with potential global scale, engage openly and constructively with all relevant regulatory bodies where they may be seeking to operate,” Alder said.
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