FSB issues new rules for stablecoins, including Libra

The FSB (Financial Stability Board), who acts as a rules coordinator for G20 (Group of 20) economies, issued new recommendations for global stablecoins. The purpose of the rules is to provide early regulations for projects like Facebook’s Libra.

The FSB comes up with rules for global stablecoins

The G20 watchdog issued a total of 10 high-level recommendations. The new rules came out earlier today, April 14th, as part of a 67-page-long report.

The FSB said that “The recommendations aim to mitigate the potential risks with the use of GSCs [global stablecoins] as means of payment and/or store of value, both at the domestic and international level, while supporting responsible innovation and providing sufficient flexibility for jurisdictions to implement domestic approaches.“

The nations that make up the G20 include Argentina, Brazil, the US, Canada, Mexico, France, Germany, Italy, the UK, Russia, Saudi Arabia, Turkey, China, India, Indonesia, South Korea, Australia, Japan, South Africa, and the EU.

The regulator continued by saying that its goal is to deliver regulations propotionate to the risks that stablecoins pose. However, it also aims to consider how the risks might change in the future. They based the rules on the principle of same business — same risks — same rules. As for the underlying technology of the stablecoins, it was not taken into account.

What are the rules?

As mentioned, there are 10 rules in total, and they are as follows:

1. Authorities should have and utilise the necessary powers and tools, and adequate resources, to comprehensively regulate, supervise, and oversee a GSC arrangement and its multi-functional activities, and enforce relevant laws and regulations effectively.

2. Authorities should apply regulatory requirements to GSC arrangements on a functional basis and proportionate to their risks.

3. Authorities should ensure that there is comprehensive regulation, supervision and oversight of the GSC arrangement across borders and sectors. Authorities should cooperate and coordinate with each other, both domestically and internationally, to foster efficient and effective communication and consultation in order to support each other in fulfilling their respective mandates and to facilitate comprehensive regulation, supervision, and oversight of a GSC arrangement across borders and sectors.

4. Authorities should ensure that GSC arrangements have in place a comprehensive governance framework with a clear allocation of accountability for the functions and activities within the GSC arrangement.

5. Authorities should ensure that GSC arrangements have effective risk management frameworks in place especially with regard to reserve management, operational resiliency, cyber security safeguards and AML/CFT measures, as well as ‘fit and proper’ requirements.

6. Authorities should ensure that GSC arrangements have in place robust systems for safeguarding, collecting, storing and managing data.

7. Authorities should ensure that GSC arrangements have appropriate recovery and resolution plans.

8. Authorities should ensure that GSC arrangements provide to users and relevant stakeholders comprehensive and transparent information necessary to understand the functioning of the GSC arrangement, including with respect to its stabilisation mechanism.

9. Authorities should ensure that GSC arrangements provide legal clarity to users on the nature and enforceability of any redemption rights and the process for redemption, where applicable.

10. Authorities should ensure that GSC arrangements meet all applicable regulatory, supervisory and oversight requirements of a particular jurisdiction before commencing any operations in that jurisdiction, and construct systems and products that can adapt to new regulatory requirements as necessary.