To mitigate risks from crypto assets, the Basel Committee on Banking Supervision (BCBS) has endorsed its global crypto banking rules, setting a 2 percent limit on bank’s exposure to certain crypto assets.
An emailed release by the global standard setter for banks’ prudential regulation, set Jan. 1, 2025 as implementation deadline for the new regulatory guideline.
According to the statement, certain crypto assets, including tokenized traditional assets such as non-fungible tokens, stablecoins and unbacked crypto assets that do not meet classification conditions “are subject to capital requirements based on the risk weights of underlying exposures as set out in the existing Basel Framework.”
Recall that a group of eight traditional finance lobby groups had previously written to the committee suggesting that a 1 percent cap on banks could be too restrictive and could derail innovations using distributed ledger technology.
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“Today’s endorsement by the GHOS (Group of Central Bank Governors and Heads of Supervision) marks an important milestone in developing a global regulatory baseline for mitigating risks to banks from crypto assets,” said Tiff Macklem, chairman of the GHOS, the oversight body of the committee.
The classification conditions the committee have set out include ensuring crypto passes a redemption risk test and basis risk test.
According to the report, “The redemption risk test is to ensure that the reserve assets are sufficient to enable the crypto assets to be redeemable at all times,” while the basis risk test “aims to ensure that the holder of a crypto asset can sell it in the market for an amount that closely tracks the peg value.”
The statement indicated that the consolidated Basel Framework will be updated shortly to include the crypto standards the committee has set out for regulating the crypto sector, which has been extremely volatile lately.
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