On July 13, the Committee on Payments and Market Infrastructures (CPMI) and Board of the International Organization of Securities Commissions (IOSCO) published a report on the Application of the Principles for Financial Market Infrastructures (PFMI) to stablecoin arrangements. The report provides guidance on considerations to determine that a stablecoin arrangement (SA) is systemically important and the principles that guide the applicability of PFMI.
Systemically important SAs commonly reflect size, nature and risk, interconnectedness of the SA activity and substitutability.
Principles include:
Governance
Comprehensive risk management
Settlement finality
Money settlements
From a functional approach, systemically important SAs should be considered an FMI for the purpose of applying the PFMI and thus, comply with all the relevant principles (i.e, governance, risk management, settlement finality and money settlements).
SAs also have unique features that require additional consideration, such as the (i) potential use of settlement assets that are neither central bank money nor commercial bank money and carry additional financial risk; (ii) interdependencies between multiple SA functions; (iii) degree of decentralization of operations and/or governance; and (iv) a potentially large-scale deployment of emerging technologies such as distributed ledger technology (DLT).