Banks Preparing new standards crypto protection
2022.12.17 11:24
Banks Preparing new standards crypto protection
Budrigannews.com – The Bank for International Settlements’ (BIS) Group of Central Bank Governors and Heads of Supervision (GHOS) has endorsed a global standard for banks’ exposure to crypto assets. According to an official announcement made on December 16, the standard, which places a limit of 2% on crypto reserves held by banks, must be implemented on January 1, 2025.
The final standard structure for banks’ exposure to digital assets, including tonenized traditional assets, stablecoins, and unbacked cryptocurrencies, is presented in the report titled “Prudential treatment of cryptoasset exposures.” It also includes feedback from stakeholders gathered through a June consultation. The report will soon be included as a new chapter in the consolidated Basel Framework, according to the Basel Committee on Banking Supervision.
Although recent developments have highlighted “the importance of having a strong minimum framework for internationally active banks to mitigate risks,” the BIS announcement emphasizes that the global banking system’s direct exposure to digital assets remains relatively low. It likewise expressed:
“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.”
Pablo Hernández de Cos, seat of the Basel Panel and Legislative head of the Bank of Spain, noted about the norm:
“An additional illustration of our commitment, willingness, and ability to act globally coordinatedly to mitigate emerging financial stability risks is the Committee’s standard on cryptoasset.” The Committee’s work program for 2023–24, which was today approved by GHOS, aims to strengthen global banking regulation, supervision, and practices. It focuses specifically on climate-related financial risks, emerging risks, digitalization, and Basel III monitoring and implementation.”
The results of the BIS’s multi-jurisdictional central bank digital currency (CBDC) pilot were made public in September, following a month-long testing phase that allowed for $22 million in cross-border transactions.
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Twenty commercial banks from those countries, in addition to the central banks of Hong Kong, Thailand, China, and the United Arab Emirates, participated in the pilot program. A June report from the BIS stated that approximately 90% of central banks are considering using CBDCs.
