Brooklyn Journal of International Law


Shuping Li

First Page



This article argues for standardized disclosure for stablecoins regulation. Information disclosure has long been considered a primary tool for consumer protection. Stablecoin issuers should disclose honestly and responsibly about the qualification of themselves, as well as the value, quantity, and operational mechanism of their stablecoins. Such disclosure can prevent issuers from taking advantage of information asymmetries for consumer exploitation or fraud. It is then up to the consumers to make informed investment or consumption decisions. More importantly, this paper argues that the fundamental role of information disclosure is to form a knowledge base for financial regulation and policymaking. The importance of information lies not only in the information itself, but also in the "knowledge" that is generated from a large amount of information, such as systemic risk assessment and proportionate regulatory response. Monetary and financial theories can refute some of the obvious fraud or scams in the market, but the shape of regulatory expertise for proportionate response needs more empirical evidence. Regulators must acknowledge that they do not always fully understand the status quo and risks of stablecoins to formulate proportionate regulatory rules. This is why, recently, experimental regulations (such as regulatory sandboxes) are being promoted in many countries. Regulators should not passively wait until the market situation becomes clear, which may be the turning point between a boom and bust that is too late to stop the crisis. Instead, regulators should actively collect information from the market. Such information gathering will serve as the information infrastructure for longer-term and larger scale regulation and governance. Finally, this article proposes a framework for stablecoins disclosure. This includes the purpose of the stablecoin and technologies used for operation; the price stabilization mechanism including exchange rate, reserve assets or algorithmic design; issuance quantity of the stablecoin; risk factors that affect price stability, distribution channels, and transaction rules. This information should be standardized and published on a centralized platform, with structural language for easier comparison and risk assessment.