20 July 2022

CPMI and IOSCO publish final guidance on stablecoin arrangements confirming application of Principles for Financial Market Infrastructures

• Guidance is a major step forward in applying “same risk, same regulation”to stablecoins, and extending the international standards for payment,clearing and settlement systems to cover systemically important stablecoinarrangements.

CPMI and IOSCO issue final guidance on stablecoin arrangements
confirming that the Principles for Financial Market Infrastructures apply to
systemically important stablecoin arrangements that transfer stablecoins.

• CPMI and IOSCO will continue to examine regulatory, supervisory and
oversight issues associated with stablecoin arrangements and coordinate
with other standard-setting bodies.

The Bank for International Settlements’ Committee on Payments and Market
Infrastructures (CPMI) and the International Organization of Securities
Commissions (IOSCO) today published final guidance confirming that stablecoin
arrangements should observe international standards for payment, clearing and
settlement systems.

“Recent developments in the cryptoasset market have again brought
urgency for authorities to address the potential risks posed by
cryptoassets, including stablecoins more broadly. The recent market
disruptions, while costly for many, were not systemic events. But they
underline the speed with which confidence can be eroded and how
volatile cryptoassets can be. Such events could become systemic in the
future, especially given the strong growth in these markets and the
increasing linkages between cryptoassets and with traditional finance.”
Sir Jon Cunliffe, Chair of the CPMI and Deputy Governor for Financial
Stability at the Bank of England

The final guidance, which follows October 2021’s proposals for consultation,
reconfirms that if a stablecoin arrangement performs a transfer function and is
determined by authorities to be systemically important, the stablecoin

arrangement as a whole would be expected to observe all relevant principles of
the Principles for Financial Market Infrastructures (PFMI).
This guidance is a major step forward in applying “same risk, same regulation” to
systemically important stablecoin arrangements that are used for payments. It is
also a key contribution to the G20 cross-border payments programme and
supports the work of the Financial Stability Board (FSB) in this area.
“Our risk management, governance and transparency standards for
existing financial market infrastructures are stringent. We expect the same
level of robustness and strength in these aspects in systemically important
stablecoin arrangements.”

Ashley Alder, Chair of the IOSCO Board and Chief Executive Officer of the
Hong Kong Securities and Futures Commission
The uses of particular stablecoin arrangements may vary and could evolve over
time. The most frequent use cases of stablecoins include acting as a bridge
between traditional fiat currencies and more volatile digital assets; serving as
collateral in cryptoasset derivative transactions; and facilitating trading, lending or
borrowing and acting as collateral in decentralised finance (DeFi), as noted in the
February 2022 FSB report in a broader context of cryptoasset markets. In the post-
trade processing of these financial transactions, stablecoin arrangements could be
used to settle payments, discharging obligations arising from these transactions
with the use of stablecoins as settlement assets (“money settlements”), and it is
recognised that this role could evolve further in the future.
Given the novelty and complexity of stablecoin arrangements, the guidance
elaborates aspects related to: (i) governance; (ii) a framework for the
comprehensive management of risks; (iii) settlement finality; and (iv) money
settlements. The guidance also provides considerations to assist authorities in
determining whether a stablecoin arrangement is systemically important. In the
light of comments received in the consultation, the final guidance provides further
clarifications with respect to, among other things, the applicability of the PFMI to
stablecoin arrangements, determination of systemic importance of a stablecoin
arrangement, and settlement finality.

The CPMI and IOSCO will continue to examine regulatory, supervisory and
oversight issues associated with stablecoin arrangements and coordinate with
other standard-setting bodies.

IOSCO

© IOSCO