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Basel Committee updates bank crypto rules

basel crypto rules

Today the Basel Committee approved a set of changes to the cryptoasset standard that was first published in December 2022. However, the standard will only be published later this month. It also finalized the set of tables and templates for banks to use in cryptoasset disclosures. Previously the Committee delayed the implementation date to 1 January 2026.

Additionally, the Committee discussed the prudential implications of tokenized deposits and stablecoins. Their financial stability risks depend on their design and the laws in various jurisdictions. However, it views the financial stability risks as broadly captured by the existing Basel Framework but will continue to monitor the topic.

Today’s announcement focused on changes to the standards for stablecoins to be considered part of Group 1b – the group that receives a relatively low risk weighting typical of mainstream securities. It did not expressly mention permissionless blockchains.

Last December it launched a consultation on proposed changes to the rules. These planned to treat all tokenized securities and stablecoins issued on permissionless blockchains as high risk, alongside cryptocurrencies. This means they would attract a risk weighting of 1250%. Various securities industry bodies objected. The compared permissionless blockchains to the internet which is also permissionless. However, applications on top of both can impose restrictions.

The consultation also reviewed the potential tightening of stablecoin reserve rules. Many stablecoins hold a significant proportion of their assets in repo agreements. For example, in May Circle’s USDC held roughly half its reserves in repo. This involves lending cash to banks overnight and receiving Treasuries as securities.

Basel previously stated its concerns about repo related to altering the quality of securities through swaps and the potential inability to meet redemptions in a timely fashion.

We’ll have to wait until later this month to find out how the rules have changed.

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