IOSCO looked at a hypothetical stablecoin managed by a company’s governance board, backed by a basket of global reserve currencies and settled on its own private blockchain. It could only be issued to “authorized participants” that buy and sell the stablecoin, and could be passed between users’ digital wallets.
The International Organization of Securities Commissions (IOSCO) thinks global stablecoin initiatives might be subject to securities laws, according to a new report.
Published Monday, the 31-page examination of regulatory issues around stablecoins – cryptocurrencies with prices pegged to a low-volatility asset reserve – stressed that jurisdiction and regulation ultimately depends on project specifics.
From its hypothetical analysis, IOSCO found that such a scheme may fall under securities regulators’ purview.
Because a stablecoin may be used for payments, an activity that «could potentially amount to regulated payment and banking activities or even regulated payment systems,» the report says. «If adopted at a large scale it could become systemically important.»
If the coin project were to grow to become a financial market infrastructure (FMI), «it would be expected to comply with» the principles for FMIs (PFMIs) from the Bank for International Settlements, according to IOSCO.
Further, the stablecoin’s reserve fund and related interests or obligations «could amount to various types of securities products, depending on their structure and function.»
The conclusion casts another potential roadblock in development and implementation of stablecoins, especially those that may grow to be integral to financial markets infrastructure.
“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 decentralised”, the report says.
That could complicate the paths of stablecoin projects seeking to embrace crypto’s core ethos: decentralization.
The Libra Association is the highest-profile global stablecoin initiative to date, and it’s been notably bullish on distributing its governance model and consensus mechanism over the next five years.
“An important objective of the Libra Association is to move toward increasing decentralization over time”, Libra wrote in its white paper.
IOSCO argues in the report, though, that “the more decentralised the arrangements are, the higher the challenges may be.”
Joint Coinbase-Circle Stablecoin Project USDC Listed on Competitor Kraken
Crypto exchange Kraken has added stablecoin USD Coin (USDC) to its list of trading pairs.
Touted as “the world’s fastest-growing stablecoin”, USDC saw listing today on crypto exchange Kraken, per a press release provided to Cointelegraph on Jan. 8.
USDC developed by Circle and Coinbase
Payment company Circle, alongside crypto exchange powerhouse Coinbase, founded an endeavor called the Centre Consortium, developing USDC under the Centre name.
An Ethereum-based (ERC-20) token, USDC is a cryptocurrency pegged to the U.S. dollar, allowing traders and investors to park their money in a stable and transferable digital asset if need be.
The past two years have seen an influx of additional stablecoins into the crypto space, including USDC, after regulatory and insolvency fears flooded the market surrounding legacy stablecoin Tether (USDT).
In December 2019, USDC posted a market cap of more than $500 million — only the second stablecoin in history to achieve such numbers, the press release noted. Still showing its market dominance at press time, USDT sits with a market cap of more than $4 billion.
Circle and Coinbase list USDC on Kraken, a competitor
Founded in 2011, Kraken is one of the oldest exchanges in the crypto space. Kraken’s position as a natural competitor to Coinbase, founded in 2012, might lead the public to question Kraken’s listing of USDC, a product connected to Coinbase.
Coinbase and Kraken are two of the largest spot exchanges in the crypto space, with Coinbase’s Pro platform ranking 3rd and Kraken ranking 4th on CoinGecko’s list of the top 100 crypto exchanges by volume — making them the largest two operating in the United States.
Cointelegraph reached out to Circle but received no response as of press time. This article will be updated accordingly upon receipt of a response.
Additionally, Whale Alert, a Twitter account dedicated to tweeting about large cryptocurrency movements, notified the public of a minting of USDC valued at more than $1.4 million on Jan. 8.
In December 2019, Kraken also purchased Circle Trade OTC, Circle’s over-the-counter (OTC) trading business, Cointelegraph reported.
