Regulation
Basel Committee Updates Bank Cryptocurrency Rules – Ledger Insights
Today, the Basel Committee approved a series of changes to the cryptocurrency standard that was first introduced Published December 2022However, the standard will not be published until later in the month. It has also finalized the set of tables and templates that banks can use in cryptocurrency disclosuresThe Committee had previously postponed the implementation date to 1 January 2026.
The Committee also 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 considers the financial stability risks to be largely captured by the current 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 the relatively low risk weighting typical of mainstream stocks. It did not specifically mention permissionless blockchains.
Last December he launched a Consultation on proposed changes to the rules. These included treating all tokenized securities and permissionless blockchain-issued stablecoins as high-risk, alongside cryptocurrencies. This means they would attract a 1250% risk weighting. Various Securities industry bodies he objected. He compared permissionless blockchains to the Internet, which is also permissionless. However, applications on both can impose restrictions.
The consultation also looked at the potential tightening of reserve rules for stablecoins. Many stablecoins hold a significant portion of their assets in repurchase agreements. For example, in May, Circle’s USDC held about half of its reserves in repo. This involves lending money to banks overnight and receiving Treasuries as securities.
Basel had previously expressed concerns about repos, in relation to the alteration of the quality of securities through swaps and the potential inability to meet repayments quickly.
We’ll have to wait until the end of the month to find out how the rules have changed.