Basel Committee to Consult Again on Cryptoassets
Posted by Colin Lambert. Last updated: December 12, 2023
The Basel Committee has agreed to consult on what it terms “targeted revisions” to its proposed standard on cryptoassets, although it has signalled a tougher regulatory stance on permissionless blockchains.
The Committee says it took stock of its review of various elements of the prudential standard for banks’ exposures to cryptoassets published in December 2022. It agreed to consult on potential targeted revisions related to the criteria for stablecoins to receive a preferential “Group 1b” regulatory treatment.
The Committee will also consult on various technical amendments to help promote a consistent understanding of the standard, and concludes that cryptoassets that use permissionless blockchains create risks that cannot be sufficiently mitigated at present and therefore agreed to retain the existing treatment for such cryptoassets. This effectively means that tokenised assets of any kind held on a permissionless blockchain, will attract a higher capital charge.
The Committee also reviewed the risks arising from banks providing cryptoasset custody services, and notes that such services raise various operational risks for banks, which reinforces the importance of full implementation of the Principles for operational resilience and those for the sound management of operational risk.
The Committee will publish what will be a third consultation paper later this month and says it will continue to monitor the evolution of banks’ cryptoasset custody activities and, taking account of market developments, will consider whether any additional work may be needed.
The initial proposal for the treatment of bank exposures to crypto assets received significant pushback from the financial markets industry, with several associations protesting they were too strict and would limit banks’ ability to provide services and participate in the still-nascent asset class.