The report suggests the regulatory framework should "cover all critical activities and entities, including activities related to the storage, transfer, exchange, and custody of reserves."

Entities that carry out multiple functions "should be subject to additional prudential requirements" and stablecoin issuers "should be subject to strict prudential requirements."

According to the report, "strong international cooperation, supported by robust, comprehensible, globally consistent crypto regulation, is essential to provide guidance, ensure consistent implementation, and contain spillover risks." 

To frame the discussion, the paper defines and classifies cryptoassets based on their underlying features and describes their purported benefits and potential risks. 

The paper presents a policy framework for cryptoassets that aims to achieve key policy objectives such as macroeconomic stability, financial stability, consumer protection, and market and financial integrity. 

The framework outlines nine key elements that are necessary to ensure that these objectives are met. However, such a framework will not fix any underlying crypto design flaws, such as the lack of a credible nominal anchor, payments finality, or scalability.

The nine elements are:

1. Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant cryptoassets official currency or legal tender status.

2. Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.

3. Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.

4. Establish legal certainty of cryptoassets and address legal risks.

5. Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors.

6. Establish a joint monitoring framework across different domestic agencies and authorities.

7. Establish international collaborative arrangements to enhance supervision and enforcement of cryptoasset regulations.

8. Monitor the impact of cryptoassets on the stability of the international monetary system.

9. Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.

Global stablecoins may amplify those challenges and could also pose challenges to competition policy, financial stability, monetary policy and, in the extreme, the international monetary system.

The report lays out initial recommendations for both private sector stablecoin developers and public sector authorities to address the challenges and risks. Finally, the report suggests that authorities could develop road maps for improving the efficiency and lowering the cost of payments and financial services. 

The G7 working group on stablecoins is chaired by Benoît Cœuré (Chair of the BIS Committee on Payments and Market Infrastructures) and was set up to examine the challenges, risks and benefits that global stablecoins may pose.

Speaking at the Singapore Fintech Festival, Christine Lagarde touched on the changing nature of money and the FinTech revolution before reviewing the benefits and downsides of central bank digital currencies (CBDC).

Lagarde said:

"I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy."

She added that CBDCs could satisfy public goals, such as financial inclusion, as they offer the ability to reach people and businesses in remote and marginalised areas; security and consumer protection; and privacy.

Various banks around the world are already "seriously considering" the possibility of issuing a CBDC, such as Canada, China, Sweden and Uruguay, "embracing change and new thinking".

However, CBDCs also present potential downsides, such as risks to financial integrity and stability as well as risks to innovation.

In parallel to Lagarde's speech, the IMF has released a report, “Casting Light on Central Bank Digital Currency", in which it concludes that CBDS could be the next "milestone" in the evolution of money, even though there is "no universal case for CBDC adoption as yet"

The report also found that "demand for CBDC will depend on the attractiveness of alternative forms of money" and that the case for CBDC will likely differ from country to country.

"For countries that decide to introduce CBDC, appropriate design and policies should help mitigate ensuing risks", the report added.

The potential adoption of CBDC also raises a multitude of new question that need investigating, such as:

"From a practical standpoint, how would tourists be able to make payments in a foreign country that has adopted CBDC? Should foreigners have access to CBDC? To what extent would this complicate know-your-customer and AML/CFT compliance, and could standardized information be requested across countries? Would access to CBDC in a reserve currency (such as e-dollars) facilitate currency substitution in countries that have weak institutions? And to what extent might safe-haven flows be encouraged, potentially draining resources from countries that face banking, sovereign, or currency crises? Finally, if CBDC were used for cross-border transactions, how might central banks be required to cooperate? Would they absorb some of the functions of correspondent banks and thus take on additional liquidity, credit, and foreign exchange rate risk—or might tokens be created for cross-border payments among particular central banks, commercial banks, or firms?"