The Group of Central Bank Governors and Heads of Supervision (GHOS) of the Bank for International Settlements (BIS) recently endorsed a global standard for banks’ exposure to crypto assets. The standard, which limits banks’ crypto reserves to 2%, will take effect on January 1, 2025. The standard, contained in a report titled “Prudential treatment of cryptoasset exposures,” addresses banks’ exposure to digital assets such as tokenized traditional assets, stablecoins, and unbacked cryptocurrencies.
It was developed based on feedback from stakeholders gathered during a consultation in June. The Basel Committee on Banking Supervision will incorporate the standard into the consolidated Basel Framework.
The Bank for International Settlements (BIS) has emphasized that the global banking system’s exposure to digital assets is currently relatively low. However, recent events have shown the importance of having a strong minimum framework in place to mitigate risks for internationally active banks.
The BIS has announced that unbacked cryptocurrencies and stablecoins with ineffective stabilization mechanisms will be subject to a conservative prudential treatment. The new global regulatory framework for banks’ exposures to cryptoassets will aim to promote responsible innovation while maintaining financial stability. The standard is intended to provide a robust and prudent framework for internationally active banks’ exposure to cryptoassets.
It was also declared that, “Unbacked cryptoassets and stablecoins with ineffective stabilisation mechanisms will be subject to a conservative prudential treatment. The standard will provide a robust and prudent global regulatory framework for internationally active banks’ exposures to cryptoassets that promotes responsible innovation while preserving financial stability.”
On related development, it has to be recalled that the results of the BIS’s multi-jurisdictional central bank digital currency (CBDC) experiment were made public in September, after a month-long testing phase that allowed for cross-border transactions worth $22 million. Twenty commercial banks from those countries as well as the central banks of Hong Kong, Thailand, China, and the United Arab Emirates participated in the trial program. Around 90% of central banks are considering using CBDCs, according to a BIS research released in June.
