IOSCO: Existing Securities Rules Could Apply to Facebook’s Libra and Other Stablecoins

  • Stablecoins are directly tied with a “stable” asset or a group of assets, including fiat currencies or commodities.
  • Facebook’s Libra stablecoin is set to launch in 2020.

The launch of the Libra stablecoin by Facebook is still months away but reports from Reuters indicate that there are already securities rules in place that could apply. Rather than restricting stablecoin, these rules could help reveal the full benefits, according to IOSCO. IOSCO is a global securities watchdog, which made comments as policymakers investigate if additional regulations will be required in this sector.

IOSCO’s contributors come from around the world, including regulators in Japan, Europe, and the United States. The organization believes that, by assessing the stablecoins, it discovered that there are benefits that could be offered, in addition to the risks they presently have.

By definition, a stablecoin is directly connected with a “stable” asset or group of assets, like the dollar or the Euro. It can be tied with a fiat currency or even a commodity, and Libra aims to be linked with bank deposits and government securities that include multiple fiat currencies.

Still, the plan to launch at all has created a wealth of concerns from many countries, including worries over consumer protection and money laundering.

Ashley Alder, chair of IOSCO, stated,

“Our analysis has shown that so-called ‘stablecoins’ can include features that are typical or regulated securities.”

Essentially, that means that the rules that presently exist on disclosures, reporting, and registration would still be applicable.

Last month, CEO Mark Zuckerberg of Facebook admitted that the launch of Libra is a “risky project” while in discussions with US lawmakers. However, he added that electronic payments could ultimately be cheaper to perform, and that more people would have access to the global financial system. While Libra should be launching in 2020, there are lawmakers in Germany, France, and other countries in Europe that want to impose a ban on the stablecoin.

Alder remarked,

“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.”

Still, better understanding regarding the applicable rights and obligations is crucial.

Alder added,

“We therefore encourage international collaboration, so the risks relating to stablecoins can be identified and mitigated, and the potential benefits realized.”

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