G7 Working Group Reports on the Impact of Global Stablecoin
10/18/2019The G7 working group on stablecoins has published a report investigating the impact of global stablecoins. The working group is comprised of senior officials from the G7 central banks, the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board, and is chaired by Benoît Cœuré (Chair of the Committee on Payments and Market Infrastructures). The report discusses the existing challenges in payment service provision, particularly on a cross-border basis, and how cryptocurrencies were originally envisaged as having the potential to solve many issues, but due to other difficulties such as price volatility, have not done so. The report goes on to consider stablecoins, focussing on global stablecoins, and how they might improve cross-border payment services. The working group recognize that stablecoins are similar to cryptoassets, but are able to stabilize the price by linking the coin's value to a pool of assets. However, stablecoins still present risks that need to be addressed, such as legal certainty, sound governance, anti-money laundering checks, market integrity, data privacy and investor protection. Global stablecoins pose further risks to financial stability, monetary policy, fair competition and the international monetary system.
The report states that providers of stablecoins are expected to address this range of legal, regulatory and governance risks and to comply with the requirements applicable to them across the jurisdictions in which they operate. It is reiterated that the G7 view is that before operation of a stablecoin can begin, the full gambit of risks must be assessed and tackled. Furthermore, the developers of stablecoins need to have arrangements in place to ensure the legal clarity of the nature of the claims of all participants within a stablecoin system.
Finally, the report discusses how regulators and lawmakers should support innovation, but also mitigate the risks. This can be achieved by coordination between regulators and authorities in different jurisdictions as well as the adoption of global standards, such as the Principles for Financial Market Infrastructures for systemically important payments arrangements.
The G7 working group confirms that authorities and international bodies will work towards developing new policy recommendations for stablecoins and welcomes the commitment of the Financial Stability Board to review the risks of stablecoin. The report also confirms that work will continue to improve the current system for payment services provision.