Uniform requirements are needed to integrate stablecoins into the international financial system.
The Bank for International Settlements (BIS) has found that despite their promise, the use of stablecoins is hindered by international regulatory fragmentation, in a survey of 11 jurisdictions. The publication said the need for stablecoin regulation is “urgent,” but diversity in regulation poses risks for their integration into the international financial system.
Most regulatory approaches are similar in their authorization of issuers, reserve requirements, risk management and Anti-Money Laundering (AML) measures, the report noted. Differences in the structuring of stablecoin issuances can cause them to be regulated under banking, securities, commodities or payment system frameworks, however.
There are also differences in the details of regulations, redemption policies and the definition of a stablecoin. For example, some jurisdictions regulate algorithmic stablecoins, which are not pegged to external assets, identically to fiat-pegged stablecoins, but the United Kingdom, Japan and Singapore regulate them separately, and jurisdictions in the United Arab Emirates ban them altogether. The report said:
