Bank of Israel published principles for stablecoin activity in Israel, which proposes rules for stablecoin activity that the Bank recommends promoting through legislation or establishing as part of the regulator’s directives.
The aim 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".
The proposals include:
- Establishing a requirement for stablecoin issuers to hold reserve assets that will cover 100 percent of its liabilities to the coin holders. This requirement aims to reduce the prudential risk deriving from the activity in stablecoins.
- Licensing of stablecoin issuers - issuers of stablecoins that could have "systemic importance" will be licensed by the Banking Supervision Department, while others will be licensed by the Capital Market Authority.
- Bank of Israel's payment systems oversight function to oversee stablecoins that are declared to be "a controlled payment system".
- Establishing coordination mechanisms among the relevant regulators to enhance the supervisory efficiency.
The document also refers to rules of activity for the stablecoin issuers in Israel and to licensing and oversight arrangements that are adjusted to their activity.
The deadline for comments is 15 March 2023.