A global standard for banks’ exposure to crypto assets has been adopted by the Group of Central Bankers and Oversight Heads (GHOS) of the Bank for International Settlements (BIS). The standard, which places a 2% cap on interbank cryptocurrency holdings, is set to come into effect on January 1, 2025, according to an official announcement on December 16.
The report, called “Prudential Treatment of Crypto Exposures,” provides the definitive benchmark framework for banks regarding exposure to digital assets, including tokenized traditional assets, stablecoins and unbacked cryptocurrencies, as well as stakeholder feedback gathered in a consultation. Released in June. The Basel Committee on Banking Supervision indicated that the report will soon be included as a new chapter in the Common Basel Framework.
The BIS announcement highlights that the global banking system’s direct exposure to digital assets remains relatively low, but recent developments have demonstrated “the importance of a robust minimum framework for internationally active banks to mitigate risks.” He also said:
“Unbacked crypto assets and stablecoins with ineffective stabilization mechanisms will be subject to prudent conservative treatment. The standard will provide a strong and prudent global regulatory framework for internationally active banks’ exposure to crypto assets that promotes responsible innovation while maintaining financial stability.”
Pablo Hernandez de Cos, Chairman of the Basel Committee and Governor of the Bank of Spain, commented on the benchmark:
“The Commission’s Standard on Crypto Assets is yet another example of our commitment, willingness, and ability to act in a globally coordinated manner to mitigate emerging risks to financial stability. The Commission’s 2023-24 Work Program endorsed by GHOS today seeks to further strengthen the regulation, supervision, and practices of banks around the world. It is focused In particular on emerging risks, digitization, climate-related financial risks, and Basel III monitoring and implementation.”
The Bank for International Settlements (BIS) in September released the results of its pilot of a multi-jurisdictional central bank digital currency (CBDC), after a month-long testing phase that enabled $22 million worth of cross-border transactions. The central banks of Hong Kong, Thailand, China and the United Arab Emirates, as well as 20 commercial banks from those regions, participated in the pilot programme. According to a Bank for International Settlements report published in June, about 90% of central banks are considering adopting CBDCs.