Regulating stablecoin issuance: permissible entities and activities

Highlights

• Regulatory approaches for stablecoin issuance differ significantly, particularly in terms of the types of entities allowed to issue them and the scope of activities permitted beyond core issuance. These differences are important since additional activities such as lending, staking or providing custody services can alter an entity's risk profile and influence the safeguards needed for its core issuance operations.
• Stablecoin frameworks generally limit issuers to a core set of functions such as issuance, redemption and reserve management, but they differ in how far issuers may stray from them. Frameworks that allow banks to issue under existing prudential regimes tend to permit a broader range of activities, as their regulatory framework already mitigates associated risks. In constrast, bespoke regimes for stablecoin issuers impose stricter limits.
• These activity restrictions apply to the issuing entity rather than the group. For banks, consolidated supervision already constrains the relocation of activities to affiliates; for non-banks, no equivalent group-wide framework applies, and restrictions can be circumvented with corporate structuring. This suggests stablecoin frameworks, or related regimes, may need to extend group-level oversight to non-bank issuers, especially for larger groups. Such oversight would be particularly important unless other measures, proportionate to the level of risk, are in place to effectively mitigate risks arising from other group activities.

The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS, its member central banks or the Basel-based standard-setting bodies.