In order to oversee cryptocurrencies linked to the value of other assets like the US dollar, the Bank of Israel has released regulatory standards for stablecoin activities in the nation.
By modifying consumer safeguards and prudential regulations, minimizing inherent risks, and allowing stablecoin use, the guidelines aim to achieve this goal.
In accordance with other jurisdictions like Hong Kong, which expects to regulate asset-backed stablecoins by June 2023, the paper mandates that stablecoin issuers maintain reserves covering “100% of its liabilities to the coin holders,” equating to the amount of cryptocurrency in circulation.
The proposed regulations also suggest that “systemically important” bigger stablecoins be regulated by the Banking Supervision Department, while other stablecoins should be under the Capital Market Authority’s supervision.
In contrast, the Bank of Israel’s payment systems supervision division need to be in charge of monitoring payment-focused stablecoins. The suggestions do not apply to algorithmic stablecoins like TerraUSD, which the central bank claimed are not frequently used for payments but may be outlawed if they gain too much traction.
Public comments on the draft regulations are welcome until March 15.
