Bank of Israel proposes framework to regulate stablecoins

Rick Steves

The goal of the regulation is to allow activity in stablecoins while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements to this unique activity.

The Bank of Israel has announced it is examining the issue of activity in digital assets, and their impact on the areas under the Bank’s purview as part of its mission to maintain financial stability, manage the monetary policy, and regulate the payment systems in Israel.

To that effect, the central bank established a committee headed by Deputy Governor Andrew Abir to examine the matter from several perspectives: prudential, regulatory, technological, monetary, and legal.

Regulation to allow stablecoins while managing its inherent risk inherent

The decision comes in light of the increased interest in digital assets and the risks derived from them. Stablecoins are getting most of the attention from Israel’s central bank, which is formulating a document of principles for regulating stablecoin activity in Israel.

“A stablecoin is a digital asset that operates on a technological infrastructure, and aims to stabilize its value by pegging it to another asset’s value, and the coin’s issuer operates a mechanism that maintains the stability of the coin’s value. In contrast to other digital assets, stablecoins have the potential to serve not only as an investment asset but also as a means of payment”, Bank of Israel stated.

“The Bank of Israel’s function, as defined in law, requires the Bank of Israel’s regulation and supervision of means of payment. The principles document refers to regulating the activity of stablecoins in Israel. The goal of the regulation is to allow activity in stablecoins while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements to this unique activity.”

The document proposes rules for stablecoin activity that the Bank of Israel recommends promoting through legislation or establishing as part of the regulator’s directives, including:

  • To establish a requirement according to which the reserve assets that will be held by a stablecoin issuer will cover 100 percent of its liabilities to the coin holders. This requirement will greatly reduce the prudential risk deriving from the activity in stablecoins.
  • In terms of the identity of the regulators, it is proposed that stablecoin issuers will require licensing: for a coin that does not have systemic importance, the licensing shall be by the Capital Market Authority; otherwise the licensing shall be by the Banking Supervision Department. In the document, criteria are proposed for defining a stablecoin as having systemic importance.
  • A stablecoin that is declared to be a controlled payment system shall be overseen by the payment systems oversight function at the Bank of Israel.
  • In order to enhance the supervisory efficiency, it is proposed to establish coordination mechanisms among the various relevant regulators.
  • Read this next

    Inside View

    Scalping or day trading?

    Among the many popular trading styles with both beginners and experienced traders are scalping, which allows you to extract small portions of profit from each price movement, and day trading, which aims to trade over a single day. In this article, you will learn what scalping and day trading are and their differences and peculiarities. Ultimately, you will learn what to look for to understand which trading style is right for you.

    Crypto Insider

    Unveiling Plasma Next: INTMAX’s Solution to Scale Ethereum with Stateless Layer

     INTMAX has launched Plasma Next on the mainnet α, a groundbreaking Layer 2 zkRollup, revealed by co-founder Leona Hioki at ETH Denver. This innovation offers scalability with constant costs per block, merging Plasma’s scalability goals with zkRollups’ security.

    Fintech

    Nuam selects Vermiculus for clearing system in Chile, Colombia, and Peru

    “We are proud to deliver a system that plays an integral role in the core of this historical merger, empowering one of Latin America’s most crucial markets with VeriClear’s state-of-the-art technology, together with our deep market expertise.”

    Retail FX, Uncategorized

    Moomoo launches super app in Malaysia

    “As an investment platform connecting 21 million retail investors globally, we envision collaborating with exchanges, regulatory bodies, and partners in the visible future to become the gateway, connecting Malaysia’s investment products to global capital and investors.”

    Executive Moves

    FXPA elects Joe Hoffman as new Chair in its 10th anniversary

    “The opportunity to serve as Chair of the FXPA is truly an honor, and I am committed to upholding the exceptional work of a FXPA. Given the recent market fluctuations due to global tensions, inflationary pressures, shifts in monetary policy, as well as the outcome of the US election and the risk of recession, brings the potential for more FX volatility in 2024. I am dedicated to expanding the FXPA’s membership and I’m excited about collaborating with all members to echo the unified voice of the FX market.”

    Market News

    Eurozone Fights Stagnation Whilst Stock Indices Rally

    European stock markets are defying economic gloom as they continue to soar to all-time highs, showcasing resilience amidst broader economic challenges.

    Web3

    Lisk Partners with Indonesia’s Communications Ministry to Boost Web3 Startup Ecosystem

    Discover the strategic partnership between Lisk and the Indonesian Ministry of Communications and Informatics, aimed at propelling local Web3 startups to new heights through comprehensive support and education.

    Executive Moves

    Admirals appoints founder Alexander Tsikhilov as CEO

    “Striking the right balance between sourcing new talent and developing and harnessing the strength and capabilities of our current workforce, is key to achieving our vision.”

    Executive Moves

    GCEX appoints Ignacio Corral and Helen Man to UK operation

    GCEX has announced the appointment of Ignacio Corral and Helen Man to its UK FCA-regulated operation based in London as the firm further expands its global business on account of increasing demand for its digital prime brokerage services.

    <