The new norm, which takes effect on January 1, 2025, restricts banks’ crypto reserves to 2% by that year. The Bank for International Settlements’ Group of Central Bank Governors and Heads of Supervision (GHOS) has approved a worldwide standard for banks’ exposure to crypto assets (BIS).
An official notice on December 16 stated that the guideline, which places a cap of 2% on cryptocurrency reserves held by banks, must be enforced on January 1, 2025.
The report, titled “Prudential treatment of crypto asset exposures,” introduces the final standard structure for banks with regard to exposure to digital assets, such as stablecoins and unbacked cryptocurrencies as well as feedback from stakeholders gathered during a consultation that was launched in June. The study will shortly be added as a new chapter to the updated Basel Framework, according to the Basel Committee on Banking Supervision.
The global banking system’s exposure to digital assets is still relatively modest, according to the BIS release, but recent events have shown “the need of maintaining a solid minimum framework for globally active institutions to reduce risks.” It also stated:
“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.”
The Basel Committee’s chairman and governor of the Bank of Spain, Pablo Hernández de Cos, said the following regarding the standard:
“The Committee’s standard on cryptoasset is a further example of our commitment, willingness and ability to act in a globally coordinated way to mitigate emerging financial stability risks. The Committee’s work programme for 2023–24 endorsed by GHOS today seeks to further strengthen the regulation, supervision and practices of banks worldwide. In particular, it focuses on emerging risks, digitalisation, climate-related financial risks and monitoring and implementing Basel III.”
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 totaling $22 million. Twenty commercial banks from those areas, as well as the central banks of Hong Kong, Thailand, China, and the United Arab Emirates, participated in the pilot initiative. Around 90% of central banks are contemplating using CBDCs, according to a BIS research released in June.