Stable coins must take the same safety precautions as traditional payments

StableCoins are cryptocurrencies that should have a stable value compared to traditional currencies or a raw material such as gold to avoid the resulting volatility bitcoin and other digital tokens most business are impractical.

The step of Facebook Inc in 2019, his own stablecoin diem, known at the time as Libra, to consider the government and central banks that a great competitor in payment transactions could arise with little regulation overnight.

Since then, Diem has radically reduced his ambitions and plans to launch a US dollar stable.

The IOSCO group of the security supervisory authorities and the bank for international payment compensation, a global forum for central banks, explained on Wednesday how the current rules for important clearing, handling and payment services should also be applied to "systemic" or strongly used stable coins.

The proposals that were publicly consulted before their final completion at the beginning of next year are putting it into practice what the supervisory authorities have long demanded: the same rules for the same type of business and the associated risks.

The rules mean that a stablecoin operator has to set up a legal person who determines how to regulate and manage operational risks such as cyber attacks.

Although the use of stablecoins is still little used for trading, it has increased quickly in crypto trading, since private investors and larger investors have warmed up for the aspiring asset class during the Covid 19 pandemic.

tether, the largest stable coin, has a market capitalization of around $ 68 billion compared to only $ 15 billion a year ago. According to Coinmarketcap, the value of the all-round USD coin, another large stablecoin, has also increased dramatically to over $ 30 billion, from just $ 2.7 billion a year ago.

countries that allow the operation of stablecoins should apply the principles in the context of their belonging to the iosco and the biz.

"This report marks a significant progress in understanding the effects of stablecoin agreements on the financial system and offers clear and practical guidelines for the standards that you have to meet in order to maintain its integrity," said Ashley Alder, chairwoman of the iosco, in an explanation.

The suggestions do not cover specific problems with stable coins that are bound to a basket of fiat currencies that are viewed separately.

A look at all business events of today can be found in our economic calendar.

(additional reporting by Tom Wilson, editing by Giles Elgood)