According to a new BIS report, the possible emergence of Libra and other global stablecoins requires regulators to rethink the ability to monitor and oversee their circulation.
Analysts at the Bank for International Settlements (BIS) have released a new report that suggests creating tools for monitoring global stablecoins. According to the report, Libra’s potential for rapid mass adoption in multiple jurisdictions will require authorities to develop dynamic, adaptable tools to oversee and track regulatory compliance by stablecoin issuers.
Although this may present some difficulties, according to analysts, the principles of operation of the stablecoin may be the key to creating such mechanisms.:
“Stablecoin offerings are one of the areas where built-in controls can work in practice. Information is the central function of regulation, both in terms of improving the functioning and efficiency of the market, and in terms of supervision, whether for the purpose of ensuring market integrity, protecting customers and investors, or prudential supervision.”
This “built-in control” will allow you to automate the direct submission of reports and registration for all potential issuers of stablecoins. Some existing digital payment platforms that do not use stablecoins already work in a similar way, such as AliPay and WeChat Pay in China.
Stablecoins based on distributed ledger technology can generate secure information and support automatic registry monitoring, reducing the need for issuers to actively collect, verify, and provide data to regulators.
The implementation of built-in supervision of stablecoins has three goals. First of all, reducing the cost of compliance with regulatory requirements, both for large and small companies. Second, the development of an open source monitoring toolset to clarify the scope of the regulatory framework. Finally, to ensure the legal finality of payments, which is different from the economic and contractual finality.
After a thorough analysis of the various problems within the proposed model, the authors of the report noted that the best solution could be to include fiat currencies in a similar paradigm. Central bank digital currencies will not present the same “conflicts of interest” as privately issued stablecoins. Analysts concluded that stablecoins could be an experimental offering that points the way to innovation within the existing system, rather than outside it:
“Just as the stablecoins of past centuries were an evolutionary step towards the concept of a central bank, today’s stablecoins, too, may eventually give way to other transformations. This could include robust government-backed alternatives and new mechanisms for cross-border exchange of central bank money.”
Recall that last month, the Bank for International Settlements and several Central Banks prepared a
report that defined the basic principles of issuing state-owned cryptocurrencies.