The Basel Committee met on July 2-3 and made policy decisions on issues including disclosure of banks' crypto exposure. Its decisions are part of the Basel III reforms launched in 2019 to improve the resilience of European Union banks through regulation, supervision and risk management.
A disclosure framework for banks' crypto assets was proposed in December 2022 and opened for comments in May 2023. The framework includes targeted changes to the original proposal and revisions to prudential standards for stablecoin holdings.
The committee's considerations on banks' crypto exposure date back to 2019. In 2021, he proposed placing crypto in the high-risk Group 2 asset set. Crypto will have a risk weight of 1250% and banks will be required to hold capital equal to the value of crypto exposure. Group 2 assets were limited to less than 1% of the value of Group 1 assets.
Stablecoins have been assigned a new 1b designation that does not impose requirements on banks' conduct that do not go beyond those for Group 1. However, stablecoins with “ineffective stabilization mechanisms” were placed in Group 2. The industry did not respond enthusiastically to the proposed restrictions.
In December, the committee proposed imposing maximum maturity limits on banks' reserve assets and over-collateralizing stablecoin holdings to offset potential depegging.
Additionally, the committee discussed the prudential implications of banks issuing stablecoins. “These risks are generally captured by the Basel Framework,” it concluded, but the committee will continue to monitor the area.
In addition to the new Basel standards, stablecoin issuers must comply with new Markets in CryptoAssets (MiCA) regulations.
The Basel Committee on Banking Supervision is supported and hosted by the BIS, but its governance and agenda are driven by the central banks of the G10 countries. Changes to existing Basel III standards will come into force upon withdrawal from January 1, 2025 to January 1, 2026.
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