The current version of the Basel Committee rules for banks engaging with crypto-assets has a harsh treatment for any use of permissionless blockchains. Hong Kong is considering exceptions to allow for a lighter touch treatment and consulting on the topic.
Under the Basel rules, stablecoins or tokenized assets on permissionless blockchains held by a bank attract the highest risk weighting of 1250%. This percentage is the same as cryptocurrencies and means a dollar of capital must be set aside for every dollar of assets held, which is prohibitive for banks. By contrast, tokenized assets on permissioned blockchains are treated the same as their conventional equivalents in most cases. It’s this disparity that Hong Kong regulators are now seeking to address.
Hong Kong is pursuing this consultation with a looming deadline. The Hong Kong Monetary Authority (HKMA) wrote to banks in late August confirming the Basel framework for crypto-assets will be implemented on 1 January 2026. However, the HKMA is capable of moving at a brisk pace, as demonstrated by the rapid implementation of stablecoin laws.
In considering a more permissive approach, the HKMA provides a set of measures (link below) to address three sets of risks: governance, technology and settlement risks, and AML. However, if the HKMA has already approved a stablecoin under its licensing regime, that stablecoin will be assumed to have mitigated the risks.
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