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Bank of Israel Tightens Regulations With New Stablecoin Regulation Proposal

Harold - CoinCu
2023-02-23 01:53
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This article has been republished with permission from CoinCu.
Key Points:
  • The Bank of Israel has published regulatory rules for stablecoins, which follow regulatory guidelines on digital assets issued by the Ministry of Finance in November.
  • The document also recommends dividing regulatory roles between multiple regulators to improve efficiency and that stablecoin issuers should have a license to operate.
  • The proposed rules will be open to public comment until March 15, after which the bank will make the necessary changes and propose legislation to the government.
The Bank of Israel released the regulatory rules for stablecoins. The document follows the digital asset regulatory guidelines issued by the Ministry of Finance in November.
Three points stand out: Issuers may be permitted to use some central bank deposits as part of the stablecoin reserves; algorithmic stablecoins will not be permitted; and Israel wants to substantially implement European norms for monitoring. This includes Europe’s PISA for overseeing electronic payments and MiCA for stablecoin issuers.
The document also proposes splitting regulatory roles among multiple regulatory agencies to improve efficiency, and stablecoin issuers should obtain operating licenses. Issuers must hold a MiCA license. As a result, the issuer is required to submit a white paper and be established in Israel. This should then explain how it works and the costs associated. Issuers must provide consumer safeguards and submit to regulatory scrutiny.
Issuers of larger stablecoins that may have “systemic importance status” should be licensed by banking regulators, while the Capital Markets Authority should oversee others. Additionally, payments-focused stablecoins should be overseen by the Bank of Israel’s payment systems oversight function.
The proposals only apply to stablecoins tied to other assets and backed by collateral, not algorithms, despite the fact that the paper cites the May collapse of algorithmic stablecoin TerraUSD as a justification for adopting laws. The central bank claimed that algorithmic stablecoins like TerraUSD are not frequently used for payments, but it made it clear that if they gained too much traction, it might outlaw them.
The Binance Dollar (BUSD) stablecoin ended when issuer Paxos terminated its agreement with Binance, which is this month’s major stablecoin news. Yet the SEC could possibly take legal action against Paxos for BUSD. However, the Financial Stability Board argues that the majority of current stablecoins won’t satisfy its requirements when it comes to its final stablecoin recommendations.
The proposed rules will be open for public comment until March 15, after which the bank will make the necessary changes and recommend legislation to the government.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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