Central banks will set standards on banks’ exposure to crypto

[ad_1]

A global standard for banks’ exposure to crypto assets has been endorsed by the Group of Central Bank Governors and Chief Supervisors (GHOS) of the Bank for International Settlements (BIS). The standard, which sets a 2% limit on crypto reserves among banks, is to be implemented on January 1, 2025, according to an official announcement on December 16.

The report, titled “Prudential Treatment of Crypto-Asset Exposures,” lays out the final standard structure for banks regarding exposure to digital assets, including toned traditional assets, stablecoins and unsecured cryptocurrencies, as well as as stakeholder feedback collected during a consultation launched in June. The Basel Committee on Banking Supervision noted that the report will soon be incorporated as a new chapter in the Consolidated Basel Framework.

The BIS announcement highlights that the global banking system’s direct exposure to digital assets remains relatively low, but recent developments have underscored “the importance of having a robust minimum framework for internationally active banks in order to ‘mitigate risk’. He also said:

“Unsecured crypto-assets and stablecoins with ineffective stabilization mechanisms will be subject to conservative prudential treatment. The standard will provide a robust and prudent global regulatory framework for internationally active banks’ exposures to crypto-assets. that promotes responsible innovation while preserving financial stability.”

Related: What is a CBDC? Why central banks want to get into digital currencies

Pablo Hernndez de Cos, Chairman of the Basel Committee and Governor of the Bank of Spain, noted of the standard:

“The Committee’s standard on crypto-assets is another example of our commitment, willingness and ability to act in a globally coordinated manner to mitigate emerging risks to financial stability. Committee for 202324, approved by the GHOS today, aims to further strengthen the regulation, supervision and practices of banks around the world, including a focus on emerging risks, digitalization, climate-related financial risks and the monitoring and implementation of Basel III.”

The BIS unveiled the results of its multi-jurisdictional central bank digital currency (CBDC) pilot project in September, following a month-long testing phase that enabled cross-border transactions worth $22 million. The pilot program involved the central banks of Hong Kong, Thailand, China and the United Arab Emirates, as well as 20 commercial banks from these regions. According to a BIS report published in June, around 90% of central banks are considering the adoption of CBDCs.

[ad_2]