According to a new BIS report, the possible emergence of Libra and other global stablecoins requires regulators to rethink the ability to monitor and supervise their circulation.
Analysts at the Bank for International Settlements (BIS) have released a new report proposing to create tools for monitoring global stablecoins. According to the report, Libra's potential for rapid mass adoption across multiple jurisdictions will require authorities to develop dynamic, adaptable tools to oversee and track regulatory compliance by stablecoin issuers.
While this can be challenging, analysts say the operating principles of a stablecoin could be key to creating such mechanisms:
“Offering stablecoins is one area where built-in controls can work in practice. Information is a central regulatory function, both in terms of improving the functioning and efficiency of the market and in terms of supervision, whether it is to ensure market integrity, protect customers and investors, or prudential oversight. ”
This “built-in control” will automate direct reporting and registration for all potential stablecoin issuers. Some existing digital payment platforms that do not use stablecoins already work in a similar way, such as AliPay and WeChat Pay in China.
Distributed ledger stablecoins can generate secure information and support automated ledger monitoring, reducing the need for issuers to actively collect, verify, and share data with regulators.
Implementing built-in stablecoin oversight has three goals. First and foremost, reducing the cost of regulatory compliance for both large and small companies. Second, the development of an open source monitoring toolkit to clarify the applicability of the regulatory framework. Finally, to ensure the legal finality of payments, which is different from the economic and contractual finality.
After carefully analyzing the various problems within the proposed model, the authors of the report noted that the best solution would be to include fiat currencies in a similar paradigm. Central bank digital currencies will not represent the same “conflicts of interest” that privately issued stablecoins carry. Analysts concluded that stablecoins could be an experimental proposal that points the way to innovation within the existing system, rather than outside it:
“Just as stablecoins of yesteryear were an evolutionary step towards the concept of a central bank, today's stablecoins may eventually give way to other transformations. This could include robust government-backed alternatives and new mechanisms for the cross-border exchange of central bank money. ”
As a reminder, last month, the Bank for International Settlements and several Central Banks prepared a report that defined the basic principles for issuing government cryptocurrencies.