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--- cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start [2022/05/12 20:17]
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+++ cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start [2022/06/17 17:59] (current)
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@@ Line 1: / Line 1: @@
 ====== 4.3 Stablecoins ======
-[[cbdc:private:cbdc_omg:04_doc:15_common:start| Return to Common Elements]]
+|< 100% >|
+| [[cbdc:public:cbdc_omg:04_doc:15_common:start| Return to Common Elements]]  |  <WRAP>
+<html><b>
+<a href="mailto:[email protected]?Subject=OMG's CBDC WG Response:
+.3 Stablecoins
+">Provide Feedback</a></b>
+</html>
+</WRAP>  |
 ===== Overview =====
-[[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
 **[[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:s:stablecoin | Stablecoins]]** is a category of cryptocurrencies attempting to control price volatility and achieve price stability by linking the value of the [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:c:coins | Coins]] offered by the cryptocurrency to an external asset.
@@ Line 20: / Line 27: @@
 <figure typesOfStableCoins>
-{{  :cbdc:private:cbdc_omg:04_doc:40_currencies:30_stablecoins:screen_shot_2022-03-20_at_12.34.38_pm.png?600  |}}
+{{  cbdc:04_doc:40_currencies:30_stablecoins:screen_shot_2022-03-20_at_12.34.38_pm.png?600  |}}
 <caption>CB Insights defines four classes of Stablecoins((
 CB Insights,
@@ Line 41: / Line 48: @@
   * **Commodity-Collateralized Stablecoins** are backed by other kinds of interchangeable assets. The most common commodity to be collateralized is gold. However, there are also Stablecoins backed by oil, real estate, and various precious metals. Holders of commodity-backed Stablecoins are essentially exposed to the value of a real-world asset.
   * **Crypto-Collateralized Stablecoins** are Stablecoins backed by a "basket" of other cryptocurrencies. In theory, allowing crypto-backed Stablecoins to be more decentralized than their fiat-backed counterparts since everything is conducted using blockchain technology. To reduce price volatility risks, these Stablecoins are often over-collateralized to help absorb price fluctuations in the collateral.
-  * **Non-Collateralized Stablecoins** is not backed by anything tangible. An example is the US Dollar, which decades ago was backed by gold. However, the US Dollars are still perfectly stable because people believe in their value. Generally, these types of coins use an algorithmically governed approach to control the Stablecoin supply.
+  * **Non-Collateralized Stablecoins** are not backed by anything tangible. An example is the US Dollar, which decades ago was backed by gold. However, the US Dollars are still perfectly stable because people believe in their value. Generally, these types of coins use an algorithmically governed approach to control the Stablecoin supply.
 ===== Global StableCoins (GSC) =====
-[[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
 The U.S. CBDC could be implemented using a [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:s:stablecoin | Stablecoin]].
@@ Line 52: / Line 59: @@
 When a Stablecoins becomes popular to man End Users in multiple jurisdictions, it may become a [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:g:gsc | Global StableCoin (GSC)]]. A major confronting GSC are the numerous National laws and regulations in the various jurisdictions. For more details, see the following sections:
-  * [[cbdc:private:cbdc_omg:04_doc:15_common:45_privacy:start | U.S. National Privacy Considerations]]
+  * [[cbdc:public:cbdc_omg:04_doc:15_common:45_privacy:start| U.S. National Privacy Considerations]]
-  * [[cbdc:private:cbdc_omg:04_doc:15_common:48_natsec:start | U.S. National Security Considerations]]
+  * [[cbdc:public:cbdc_omg:04_doc:15_common:48_natsec:start| U.S. National Security Considerations]]
-  * [[cbdc:private:cbdc_omg:04_doc:15_common:50_international:start | International Considerations]]
+  * [[cbdc:public:cbdc_omg:04_doc:15_common:50_international:start| International Considerations]]
 GSCs are not without their vulnerabilities. These have been elaborated by The Financial Stability Board((
 The Financial Stability Board,
-__Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
+__Regulation, Supervision, and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
 October 2020,
 Accessed: 26 April 2022,
@@ Line 67: / Line 74: @@
 <caption>Examples of vulnerabilities and related functions and activities in a [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:g:gsc | Global StableCoin (GSC)]] arrangement (stylised presentation)((
 The Financial Stability Board,
-__Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
+__Regulation, Supervision, and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
 October 2020,
 Accessed: 26 April 2022,
@@ Line 75: / Line 82: @@
 ^ Type of Vulnerability  ^ Main Determinants  ^ Functions and Activities Primarily Concerned  ^
 ^ Financial exposures in the [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.a_glossary:g:gsc | Global StableCoin (GSC)]] arrangement, giving rise to market, liquidity and credit risks. | <WRAP>
-  : 1. Choice, composition and management of the GSC reserve assets
+  : 1. Choice, composition, and management of the GSC reserve assets
   : 2. Robustness of liquidity provision by GSC resellers/market makers
-  : 3. Ability of actors in the GSC arrangement to employ leverage
+  : 3. The ability of actors in the GSC arrangement to employ leverage
 </WRAP>|<WRAP>
   : 1. Governing the GSC arrangement
-  : 2. Issuing, creating and destroying GSCs
+  : 2. Issuing, creating, and destroying GSCs
   : 3. Managing reserve assets
-  : 4. Exchanging, trading, reselling and market making of stablecoins
+  : 4. Exchanging, trading, reselling, and market making of stablecoins
 </WRAP>|
 ^ Weaknesses in the GSC infrastructure, giving rise to operational risk (including cyber risks) and risk of loss of data.| <WRAP>
   : 1. Reliability and resilience of the GSC’s ledger and validation mechanism, including validator nodes
-  : 2. Capacity of network to validate and process large volumes of transactions
+  : 2. The capacity of the network to validate and process large volumes of transactions
 </WRAP>|<WRAP>
   : 1. Reliability of custodians/trustees
@@ Line 102: / Line 109: @@
   : 1. Governing the GSC arrangement
   : 2. Storing of private keys providing access to GSCs
-  : 3. Exchanging, trading, reselling, and market making of GSCs
+  : 3. Exchanging, trading, reselling, and market-making of GSCs
 </WRAP>|
 </table>
@@ Line 109: / Line 116: @@
   : //For example, in many jurisdictions AML/CFT regulations, seem to apply to Stablecoin activities generally. In a few jurisdictions, other types of financial regulation, such as market integrity, and investor and consumer protection regulations, also apply to Stablecoin activities like issuance, exchanging, and trading of Stablecoin.// See the Table {{ref>gscVulFromActiv}} on potential vulnerabilities arising from Stablecoin activities.((
 The Financial Stability Board,
-__Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
+__Regulation, Supervision, and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations__,
 October 2020,
 Accessed: 26 April 2022,
@@ Line 139: / Line 146: @@
 Ability to regulate and supervise the GSC arrangement in a holistic manner, e.g. through cooperation among authorities (akin to comprehensive consolidated supervision)
-Ability to require a GSC arrangement to be governed in a manner that facilitates effective regulation and supervision, including by prohibiting fully decentralised systems
+Ability to require a GSC arrangement to be governed in a manner that facilitates effective regulation and supervision, including by prohibiting fully decentralized systems
-Governance, internal control and risk management requirements applicable at the level of the entire GSC arrangement
+Governance, internal control, and risk management requirements applicable at the level of the entire GSC arrangement
 Power to wind down or resolve a GSC arrangement
@@ Line 151: / Line 158: @@
 AML/CFT and sanctions controls
 </WRAP> | <WRAP>
-The revised FATF Standards apply. Based on known models, developers and governance bodies of centralised GSCs will, in general, have AML/CFT obligations as a financial institution (e.g., as a business involved in the ‘issuing and managing means of payment’) or a VASP (e.g. as a business involved in the ‘participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset’). They can then be held accountable for the implementation of AML/CFT controls across the arrangement
+The revised FATF Standards apply. Based on known models, developers and government bodies of centralized GSCs will, in general, have AML/CFT obligations as a financial institution (e.g., as a business involved in the ‘issuing and managing means of payment’) or a VASP (e.g. as a business involved in the ‘participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset’). They can then be held accountable for the implementation of AML/CFT controls across the arrangement
-and taking steps to mitigate ML/TF risks (e.g. in the design of the so-called stablecoin).This could include, for example, limiting the scope of customers’ ability to transact anonymously using the so-called stablecoin and/or by ensuring that AML/CFT obligations of AML/CFT-obliged intermediaries within the arrangement are fulfilled.
+and for taking steps to mitigate ML/TF risks (e.g. in the design of the so-called Stablecoin). This could include, for example, limiting the scope of customers’ ability to transact anonymously using the so-called Stablecoin and/or ensuring that AML/CFT obligations of AML/CFT-obliged intermediaries within the arrangement are fulfilled.
   :
 For GSC arrangements set up entirely by banks, the Basel Framework and associated principles for supervision and colleges would
@@ Line 162: / Line 169: @@
 ))
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding these
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding these
-vulnerabilities would be those on legal basis, governance and comprehensive management of risks. Responsibility E would provide a strong basis for cooperation among relevant authorities. See Annex 4 on CPMI-IOSCO preliminary analysis.
+vulnerabilities would be those on a legal basis, governance, and comprehensive management of risks. Responsibility E would provide a strong basis for cooperation among relevant authorities. See Annex 4 on CPMI-IOSCO preliminary analysis.
 For GSC arrangements where the token or the reserve qualifies as a security, relevant IOSCO Principles and Standards that cover governance arrangements would apply, depending on the structure. These would include relevant cooperation agreements (IOSCO Principles((
@@ Line 199: / Line 206: @@
 )) and the work of the Follow-Up Group to address potential regulatory arbitrage).
 </WRAP>|
-^ Issuing, creating and destroying stablecoins | <WRAP>
+^ Issuing, creating, and destroying stablecoins | <WRAP>
 Inability to meet redemptions in stressed conditions
@@ Line 217: / Line 224: @@
 management of operational risk.
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those related to frameworks for comprehensive risk management and settlement. See Annex 4 on CPMI-IOSCO preliminary analysis. Depending on the creation/redemption
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those related to frameworks for comprehensive risk management and settlement. See Annex 4 on CPMI-IOSCO preliminary analysis. Depending on the creation/redemption
 processes, the IOSCO Principles for the Regulation of Exchange Traded Funds (2013)((
 Board of the International Organization of Securities Commissions,
@@ Line 265: / Line 272: @@
 )) IOSCO Principles
 for the Regulation of Exchange Traded Funds or IOSCO Policy Recommendations for MMFs
-(2012).((
+(2012). ((
 International Organization of Securities Commissions,
 __IOSCO Consults on Money Market Fund Systemic Risk Analysis and Reform Options__,
@@ Line 274: / Line 281: @@
 ))
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on custody and investment risks and transparency. See Annex 4 on CPMI-IOSCO preliminary analysis.
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on custody and investment risks and transparency. See Annex 4 on CPMI-IOSCO preliminary analysis.
 </WRAP>|
 ^ Providing custody/trust for reserve assets | <WRAP>
@@ Line 304: / Line 311: @@
 ))
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on custody and investment risks and transparency. See Annex 4 on CPMI-IOSCO preliminary analysis.
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on custody and investment risks and transparency. See Annex 4 on CPMI-IOSCO preliminary analysis.
 </WRAP>|
 ^ Operating the infrastructure | <WRAP>
-Disruption to the mechanism that links the value of the stablecoin and the value of its reserves, for example a cyber incident
+Disruption to the mechanism that links the value of the stablecoin and the value of its reserves, for example, a cyber incident
 Uncertainty on the revocability of the payments
@@ Line 321: / Line 328: @@
 For GSC arrangements involving banks, the prudential risks and operational resilience vulnerabilities would be subject to the Basel Framework and Principles for the sound management of operational risk.
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on framework for the comprehensive management of risks
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding these vulnerabilities would be those on a framework for the comprehensive management of risks
 and settlement. See Annex 4 on CPMI-IOSCO preliminary analysis.
 </WRAP>|
@@ Line 336: / Line 343: @@
 management of operational risk.
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, some of the most relevant principles regarding this vulnerability would be that on operational risk and settlement. See Annex 4 on CPMI-IOSCO preliminary analysis.
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, some of the most relevant principles regarding this vulnerability would be on operational risk and settlement. See Annex 4 on CPMI-IOSCO preliminary analysis.
 </WRAP>|
-^ Storing the private keys providing access to stablecoins (wallets) |<WRAP>
+^ Storing the private keys providing access to Stablecoins (wallets) |<WRAP>
 Disruption of a wallet, for example, theft of coins from a digital wallet or operational (e.g. cyber) incident.
@@ Line 351: / Line 358: @@
 For GSC arrangements involving banks, the prudential risks and operational resilience vulnerabilities would be subject to the Basel Framework and Principles for the sound management of operational risk.
-For GSC arrangements deemed to be perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. On the basis of a preliminary analysis, a relevant principle regarding these vulnerabilities would be that on operational risk. See Annex 4 on CPMI-IOSCO preliminary analysis.
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. On the basis of a preliminary analysis, a relevant principle regarding these vulnerabilities would be an operational risk. See Annex 4 on CPMI-IOSCO preliminary analysis.
 </WRAP>|
 ^ Exchanging, trading, reselling and market making of stablecoins | <WRAP>
-Withdrawal of liquidity provision by authorised resellers/market makers
+Withdrawal of liquidity provision by authorized resellers/market makers
 Disruption of a trading platform.
-Fraud, market manipulation, unauthorised transactions
+Fraud, market manipulation, unauthorized transactions
 Cyber incident
@@ Line 366: / Line 373: @@
 Settlement finality requirements
-Allocation of legal responsibility for unauthorised transactions
+Allocation of legal responsibility for unauthorized transactions
 Cyber security and other operational resiliency safeguards
@@ Line 372: / Line 379: @@
 </WRAP>|<WRAP>
-FATF Standards apply to all businesses carrying out trading/exchanging activity. The FATF Standards do not explicitly apply to peer-to-peer transactions without use of a VASP or financial institution.
+FATF Standards apply to all businesses carrying out trading/exchanging activity. The FATF Standards do not explicitly apply to peer-to-peer transactions without the use of a VASP or financial institution.
 For GSC arrangements involving banks, the prudential risks and operational resilience vulnerabilities would be subject to the Basel Framework and Principles for the sound
 management of operational risk.
-For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI apply. See
+For GSC arrangements deemed to perform systemically important payment system functions or other FMI functions that are systemically important, the PFMI applies. See
 Annex 4 on CPMI-IOSCO preliminary analysis.
@@ Line 411: / Line 418: @@
 ===== Stablecoin Theoretical User Scenario =====
-[[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
-  : **Note:** The following Stablecoin Theoretical User Scenario is only provided for discussion purposes. Actual User Scenarios would be developed during systems analysis and modeled using a Model-Based Systems Engineering (MBSE) approach and address the problem in far more detailed with a team of experts.
+  : **Note:** The following Stablecoin Theoretical User Scenario is only provided for discussion purposes. Actual User Scenarios would be developed during systems analysis and modeled using a Model-Based Systems Engineering (MBSE) approach and address the problem is far more detail with a team of experts.
 In the following example, the CBDC is modeled as Stablecoins, each account representing an End User. The End Users would actually “own” a wallet that contains account information, where Stablecoins are recorded as a balance that can be added to or subtracted from. For example, a retail purchase would deduct the amount of the purchase from the customer End User's account and add it to the Store's account.
@@ Line 420: / Line 427: @@
 <figure stableScenario>
-{{  :cbdc:private:cbdc_omg:04_doc:40_currencies:30_stablecoins:screen_shot_2022-03-20_at_5.27.32_pm.png?950  |}}
+{{  cbdc:04_doc:40_currencies:30_stablecoins:screen_shot_2022-03-20_at_5.27.32_pm.png?950  |}}
 <caption></caption>
 </figure>
@@ Line 484: / Line 491: @@
 ===== Examples =====
-[[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
-In this discussion, only the requirements identified during the [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:private:cbdc_omg:15_summary:start | White Paper Analysis]] are considered. Table {{ref>StablecoinReqiurements}} represents the allocated of requirements germane to the Stablecoins.
+In this discussion, only the requirements were identified during the [[https://www.omgwiki.org/CBDC/doku.php?id=cbdc:public:cbdc_omg:15_summary:start | White Paper Analysis]] are considered. Table {{ref>StablecoinReqiurements}} represents the allocated of requirements germane to the Stablecoins.
 <table StablecoinReqiurements>
-<caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG</caption>
+<caption>Example of mapping a subset of requirements identified during the White Paper Analysis conducted by the OMG's CBDC WG</caption>
 |< 100% 20% ->|
 ^ Area                ^ Desirements  ^
@@ Line 499: / Line 506: @@
 ===== Discussion of Examples =====
-[[cbdc:private:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
+[[cbdc:public:cbdc_omg:04_doc:15_common:30_stablecoins:start| Return to Top]]
@@ Line 520: / Line 527: @@
 ^ R0010 ^ CBDC has **Risk** of significant energy footprint similar to Cryptocurrencies | This depends on the [[https://www.omgwiki.org/dido/doku.php?id=dido:public:ra:xapend:xapend.k_consensus:start | Consensus Algorithm]] used for the Stablecoin.|
 ^ R0022 ^ **Risk** of stablecoins and other types of **''nonbank''** money shifting deposits away from banks even without a CBDC | Stablecoin is a specific solution |
-| **''B''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#benefits| Benefit Considerations ]] |||
+| **''B''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#benefits| Benefit Considerations ]] |||
-| **''P''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#policy_considerations| Policy Considerations]] |||
+| **''P''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#policy_considerations| Policy Considerations]] |||
-| **''R''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#risks| Risk Considerations ]] |||
+| **''R''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#risks| Risk Considerations ]] |||
-| **''D''** = [[cbdc:private:cbdc_omg:04_doc:12_summary:start#design| Design Considerations]] |||
+| **''D''** = [[cbdc:public:cbdc_omg:04_doc:12_summary:start#design| Design Considerations]] |||
 </table>

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