Cryptocurrencies backed by cash could elude new regs

Cryptocurrencies backed by cash could potentially be covered by the same regulations used to govern securities, according to a global financial oversight group. The finding could help move forward projects such as Facebook’s Libra digital currency, known as a stablecoin.

The International Organization of Securities Commissions (IOSCO), made up of securities regulators from the U.S., Europe and Japan, said its analysis shows “stablecoins can include features that are typical of regulated securities.”

The IOSCO made its proclamation after its Oct. 30 meeting in Madrid. Earlier last month, a G7 working group published a report on stablecoins, saying they have many of the features of traditional cryptocurrencies but may be more capable of serving as a means of payment and a store of value.

“And they could potentially contribute to the development of global payment arrangements that are faster, cheaper and more inclusive than present arrangements,” Ashley Alder, chair of the IOSCO Board, said.

Even so, the G7 group cautioned that stablecoins are just one of many initiatives that seek to address existing challenges in the payment system and, “being a nascent technology, they are largely untested.

“These potential benefits can only be realized if significant risks are addressed. Stablecoins, regardless of size, pose legal, regulatory and oversight challenges and risks,” the report said. The group said the risks may fall outside existing regulatory frameworks, requiring potential revisions to current standards or even the creation of new ones.