Bank of Israel published a set of requirements for issuers «stablecoins». The recommendations envisage banning algorithmic stablecoins if they gain widespread use in payments.
The initiative aims to legitimise stablecoins with risk governance, consumer protection and prudential requirements. It clarifies the guiding principles for regulating digital assets the country’s Ministry of Finance published in November 2022 guiding principles for regulating digital assets.
Stakeholders may submit comments until 15 March. The central bank will subsequently transmit the revised document to the government for approval.
The motivation for developing the rules was the collapse of Terra in May 2022. The regulator warned that algorithmic stablecoins would be banned if they gain popularity. Issuers of such assets will be required to move to full backing.
The Bank of Israel recommends maintaining reserves at “100% of its obligations to coin holders.”
Stablecoin issuers will require authorization to operate from the Capital Market, Insurance and Savings Authority; systemically important institutions will require a license from the Department of Banking Supervision.
Organizations whose «stablecoins» are oriented toward payments will fall under the responsibility of the relevant service of the Bank of Israel.
To enhance regulation, mechanisms for inter-ministry coordination are envisaged.
During 2023-2024 the Hong Kong Monetary Authority will introduce mandatory licensing for stablecoin issuers.
In October СФС within the G20 group concluded that none of the existing stablecoins meet the standards set for central bank digital currencies by the world’s largest economies.
Moody’s is developing a scoring system for stablecoins, according to media reports.
Earlier CryptoCompare noted a decline in market share algorithmic stablecoins from 12.4% in April 2022 to 1.71%.