On the 12th July 2022, the Committee on Payments and Market Infrastructures (“CPMI”) and the International Organisation of Securities Commissions (“IOSCO”), published their final guidance on stablecoin arrangements confirming that the Principles for Financial Market Infrastructures (“PFMI”) apply to systematically important stablecoin arrangements that transfer stablecoins.
Initially, in October 2021, the CPMI and the IOSCO jointly issued a consultative document within which they gave a list of questions to be answered by individuals within the field. The idea behind this was that there should be the same form of regulation considering that the same risks are involved. Sr John Cunliffe, the Chair of the CPMI, explained that the constant “increasing linkage between crypto assets with traditional finance” create an urgency to develop further regulations. Through the expansion of the framework, market disruptions are prevented from becoming systematic events.
The final guidance has confirmed that the stablecoin arrangements shall observe the international standards applicable to payment, clearing and settlement systems. This creates a uniform regulatory framework, making crypto assets subject to the same rules as those governing the Financial Market Infrastructures. Ashley Alder, chair of the IOSCO, stated that it is now expected that the rules and policies of stablecoin arrangements should be as robust as that of other financial market infrastructures.
The report provides a definition for stablecoins, identifying them as “a means of payment or store of value” with three essential characteristics:
- Issuance, redemption and stabilisation of the value of the coins;
- Transfer of coins; and
- Interaction with coin users for storing and exchanging coins.
The report then goes through the way the PFMI should be applied in the stablecoin arrangements, specifically the governance, the framework of risk management, settlement finality and money settlements.
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