BIS on yield-bearing stablecoin: controversy and acceptance

The emergence of yield-bearing products based on payment stablecoins has brought new challenges for policymakers. These products, offered by some cryptoasset service providers, blur the line between payment instruments and investments. They may compete with bank deposits but are often provided without equivalent prudential oversight, deposit insurance and transparency. This exposes users to consumer protection gaps and financial losses. In the latest FSI Brief, Denise García analyses existing regulatory approaches for stablecoin-related yields. The paper describes mechanisms behind yield generation and the risks they pose. It provides an overview of the current regulatory treatment applicable to stablecoin-related yields for issuers and cryptoasset service providers in four jurisdictions that have enacted or are developing stablecoin regulations. As stablecoins become more integrated into the financial system, a consistent and effective regulatory framework will be key to addressing consumer protection and financial stability risks. https://bit.ly/43rZUHX #StablecoinYield #InvestorProtection #FinancialStabilityInstitute

𝗛𝗮𝘂𝗽𝘁𝗺𝗮𝗻 𝗟𝗮𝘆𝘀 𝗢𝘂𝘁 𝗦𝘁𝗮𝗯𝗹𝗲𝗰𝗼𝗶𝗻 𝗦𝘁𝗮𝗸𝗲𝘀 𝘄𝗶𝘁𝗵 𝗩𝗲𝗴𝗮𝘀 𝗔𝗻𝗮𝗹𝗼𝗴𝘆 Click here: https://finop.us/gonme7 I had the opportunity to cover National Credit Union Administration (NCUA) Chairman Kyle Hauptman's session at the #UndergroundCollision event in Las Vegas, held on the eve of Money20/20. He used a brilliant and very fitting "Vegas analogy" to describe the essential, non-negotiable nature of stablecoins, that they're like casino chips. His point: "The room we’re in, all of this... rests on one thing, that this [$100 chip] is interchangeable for this [$100 bill] without hesitation at any time.” That, he argued, must be the standard for a stablecoin. Any doubt about its stability or redeemability could be catastrophic. In my latest article, I detail his full remarks on:  • The critical liquidity challenges facing stablecoin issuers (e.g., a redemption request on a Friday night when the Treasury market is closed).  • The fast-approaching rulemaking deadline for the "Genius Act."  • His candid and skeptical support for the NCUA's new succession planning rule. It was a fascinating look at the high-stakes regulatory framework taking shape for credit unions and fintechs. You can read my full write-up here: https://finop.us/gonme7 #Stablecoin #Fintech #CreditUnions #Regulation #Innovation

“The world has woken up to stablecoins… but it hasn’t woken up at all.” Luca Prosperi argues that while the world has woken up to stablecoins, it hasn’t truly woken up at all. Most are only beginning to explore the narrow use cases of digital money, but he believes stablecoins will eventually swallow the entire bank deposit framework. It’s the start of a long and deep wave of innovation that depends on high-quality infrastructure, the kind M0 is building. Catch the full conversation on Money Code with Chuk Okpalugo and Raj Parekh and subscribe here: https://lnkd.in/dMMPvv4t Powered by BVNK.

Are we approaching widespread stablecoin acceptance in the UK? The Bank of England and FCA appear to be relaxing their previously cautious stance on stablecoin regulation to embrace innovation. Deputy Governor Sarah Breeden proposes a "multi-money" payments system to help the UK catch up with global competitors while enabling faster cross-border payments and tokenisation. If new plans are approved, stablecoin issuers will have greater flexibility of choice regarding what assets they may use as backing, including UK government bonds. Alongside these discussions, the Bank of England and FCA are testing digital money infrastructure through initiatives like the Digital Securities Sandbox and Digital Pound Lab, with a "digital pound" blueprint expected by 2026. Read more on the shift here: https://lnkd.in/gVMM62CH #Stablecoin #DigitalPayments

Many FSB members have expressed concerns about multi-jurisdictional stablecoins, i.e. stablecoins issued from multiple jurisdictions by the same or affiliate entities. 💸 Issuers of such stablecoins are trying to expand their business by proposing to clients a token that can be traded and redeemed in various jurisdictions, but is subject to different regulatory frameworks. ⚡ However, such schemes can introduce operational complexity, financial stability risks and regulatory challenges. 🙋 Box 5 in our report looks at this question: https://bit.ly/4n8pNDU #stablecoins #multijurisdictionalstablecoins

Payment #Stablecoins don’t pay interest. But there are all sorts of ways to earn #Yield on stablecoin holdings. Yield generation often involves #Lending, margin pools, arbitrage/derivatives collateral or facilitating the use of stablecoins in #DecentralisedFinance (#DeFi) lending protocols. In other cases, yields are provided through loyalty programmes. In a new Bank for International Settlements – BIS Financial Stability Institute (FSI) brief, our colleague Denise García dives into these issues. She assesses current market practices and the #Regulatory response in four key jurisdictions (the #EuropeanUnion with #MiCA, the key financial centers #HongKongSAR and #Singapore with their frameworks and the #UnitedStates with the GENIUS Act). She raises views on how #Regulation can ensure that issuance and service provision are covered in a consistent and coherent manner. As this market develops, it is important to have a shared basis of facts and a candid dialogue on the regulatory implications of different decisions. This work contributes to that process. Read more at: https://lnkd.in/eyAEHEdM

Traditional banks face a stark choice as stablecoin transaction volumes surge past US$20tn annually: integrate or risk obsolescence. Nick Botha at AutoRek argues that while 90% of financial institutions now prioritise speed over cost savings, success hinges on robust compliance frameworks. With the FCA's CASS 16/17 extensions arriving next year and MiCA licensing players across the EU, universal compliance systems trump regulatory arbitrage. Banks must evolve beyond holding customer funds to providing operational infrastructure for tokenised assets in an increasingly digital economy. More below. #Stablecoins #DigitalBanking #FintechRegulation

I continue to actively monitoring the potential advantages and disadvantages of integrating cryptocurrencies into the regulated financial services industry. Stablecoins offer a way to reduce the volatility associated with traditional cryptocurrencies; however, they still present risks, such as the possibility of de-pegging events and the necessity for users to have confidence in the issuer's reserves. The positive impact of stablecoins on the global payment system is evident, as they facilitate faster and more cost-effective cross-border transactions. Nevertheless, challenges remain, including regulatory uncertainty, technical obstacles for small businesses, and the critical need for effective reserve management to ensure stability. #riskmanagement, #transparency, #smartregulatoryoversight