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The Global Financial Markets Association’s (GFMA) comments on FSB Consultation Paper on Global Stablecoins
PAR002_123 • Aug 15, 2020
GFMA Response to FSB Consultation Paper on Global Stablecoins
The GFMA submitted a response to the FSB consultation paper on “Addressing the regulatory, supervisory and oversight challenges raised by ‘Global Stablecoin’ arrangements.”
The GFMA recently provided its response to the Financial Stability Board’s consultation paper titled 'Addressing The Regulatory, Supervisory And Oversight Challenges Raised By Global Stablecoin Arrangements'. The GFMA put forward certain recommendations to support the implementation of global stablecoin (GSC) arrangements provided for in the Paper. These recommendations include:
- FSB should utilise a crypto-asset taxonomy that clearly establishes “stablecoin” as a subcategory of “value stable crypto-assets” to facilitate appropriate regulatory treatment.
- Principle of ‘same activity, same risk, same regulation’ should be applied to the regulation of stablecoin for effective supervision and oversight, excluding digital money already regulated under existing rules or subject to Financial Market Infrastructure (“FMI”) regulation.
- FSB should clarify to whom the Paper is directed (issuers, custodians etc?) and also consider other service providers which interact with stablecoin arrangements.
- FSB should continue its global coordination with other regulators as international consistency is important, to provide clarity around jurisdictional oversight and to encourage the development of global standards and principles for interoperability.
- Regulatory framework adopted by the FSB must be technology agnostic to remain agile and encourage innovation.
- GFMA requested FSB to provide further details about what constitutes “global” or “systematic” importance and their associated regulatory requirements, and to distinguish between “stablecoin arrangements” and “systemically important stablecoin arrangements” focusing on the operator of the system rather than the stablecoin itself.
The GFMA felt that the existing FSB definition of a stablecoin is too broad, and suggested new definitions which excludes other digital forms of money already covered by existing regulations. It also acknowledged that stablecoin are not only asset-linked or algorithm-based, but can be hybrid.
Therefore the GFMA recommends that the FSB consider the below classification of crypto-assets.
Types of Crypto-Assets
A. Cryptocurrencies
- Digital representations of value with no redemption rights against a central party and may function within the community (enabled through peer-to-peer networks) of its users as a medium of exchange, unit of account or store of value, without having legal tender status. They may also act as an incentive mechanism and/or facilitate functions performed on the network they are created in; their value is driven by market supply/demand therein
B. Value-Stable Crypto-Assets
1. Central Bank Digital Currencies (CBDC22) (e.g., e-Krona)
2. Financial Market Infrastructure (FMI) Tokens (e.g., USC)
3. Tokenized Commercial Bank Money23 (e.g., Signet)
4. Stablecoins:
a. Asset Linked Crypto-Asset
• Fiat currency linked (e.g., Tether, Paxos, USDC, Gemini)
• Other real asset linked (e.g., Sendgold, Xaurum )
• Crypto-asset linked (e.g., Maker)
b. Algorithmic Crypto-Asset
• Typically not linked to any underlying assets and each token can be pegged to a price level or a unit maintained
through buying, selling or exchange24 among assets25 or some other pre-determined mechanism26
C. Security Token
• Token issued solely on DLT that satisfies the applicable regulatory definition of a security
i. or financial instrument under local law (e.g., World Bank’s “Blockchain Bond”)
• Token that represents on DLT underlying securities/financial instruments issued on a different
platform (e.g., a traditional CSD, registrar, etc.), where such representation itself satisfies the definition
of a security/financial instrument under local law
D. Settlement Token
E. Utility Token
The proposal above is an initial starting point for a classification of crypto-assets. It is designed to help
regulators evaluate which types of regulations should apply to which type of assets. Note however that as
these assets evolve and potentially new ones are created, this classification may need to be updated over time.
Source: https://www.gfma.org/correspondence/gfma-response-to-fsb-consultation-paper-on-global-stablecoins/
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