IOSCO Report: Stablecoins May Fall Under Securities Regulations In Certain Circumstances
- A new report by the International Organization of Securities Commission (IOSCO) on Stablecoins has highlighted that these digital assets are subject to the laws within the jurisdiction of operation.
- This means that in some countries they may be regulated as securities depending on the specifics.
The report was published on March 23 and shed more light on the legal uncertainty around stablecoins. IOSCO highlighted an example that sounds pretty similar to Facebook’s Libra. According to the summary, if an entity runs its own stablecoin on a private blockchain with a unique form of governance, then the asset falls under securities oversight.
Similarly, despite their label, many so-called stablecoins are neither “stable” nor “coins” in the true sense of either word.
So, whilst stablecoin is a marketing term that has been widely adopted by industry, more neutral terms, may be more accurate starting points for regulatory analysis in many instances
This report by IOSCO further highlights that stablecoins would have to comply with some international standards if they were to play a bigger role in the financial ecosystem. For instance, if a crypto coin grows to the level of being a financial market infrastructure, it should be within the PFMI’s (Principles for FMI’s). The report, however, recognizes it will not be a walk in the park;
“It may be challenging for some systemically important stablecoin arrangements to comply with the high standards of the PFMI, particularly for those systemically important stablecoin arrangements that are partially or highly decentralized,”
According to the report, the fact that stablecoin contracts may have obligations and pegged interests is somewhat proof that they may fall under securities. So far, a number of countries including the U.S and U.K have begun the process of formulating laws for blockchain and crypto markets.