27 November 2020
The FSB, the organisation that coordinates the development of effective regulatory, supervisory and other financial sector policies at an international level, published its final report on the regulation, supervision and oversight of global stablecoin (“GSC”) arrangements (“Final Report”) in October 2020. A stablecoin, according to the FSB’s definition, is “a crypto-asset that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets”, whereas a GSC is a stablecoin with a potential reach and adoption across multiple jurisdictions and the potential to achieve substantial volume”.
The Final Report gave ten high-level recommendations to address, mainly, the financial stability risks posed by GSC, which by extension are also relevant to other stablecoin arrangements and crypto-assets with similar risks to those posed by GSCs. The recommendations are largely unchanged from those in its draft report issued for consultation in April 2020. In addition to financial stability risks, it recommended that other important issues related to GSCs, including money laundering, terrorist financing, data privacy, consumer and investor protection, competition and market integrity should also be effectively addressed in a supervisory and regulatory framework for GSC arrangements, despite not being the focus of the Final Report. In particular, the Final Report included a summary of findings in the report to the G20 on so-called stablecoins published by the Financial Action Task Force (“FATF”), of which Hong Kong is one of more than 200 member jurisdictions, in July 2020. Please refer to our previous newsletter for the highlights of the FATF’s report.
The Final Report proposed an indicative timeline for follow-up actions and review as regards international standard-setting work and updates of its high-level recommendations. Specifically, it provided four milestone dates:-
|
Follow-Up Work |
Milestone Date |
|
Complete the setting of international standards and principles on GSCs |
By December 2021 |
|
Establish cooperation, coordination and information-sharing arrangements amongst national authorities consistent with the FSB report and international standards |
By December 2021 (and as needed based on the development of cross-border GSC arrangements) |
|
Establish regulatory, supervisory and oversight frameworks in national jurisdictions that are consistent with the FSB recommendations and international standards |
By July 2022 (and as needed based on the development of cross-border GSC arrangements) |
|
Review and assessment of the need to refine international standards and FSB’s recommendations |
By July 2023 |
For further information, please contact:
Simon Deane, Partner, Deacons
simon.deane@deacons.com
