Central Banks to establish guidelines for banks’ crypto exposure
The new regulation restricts bank cryptocurrency reserves to 2% by 2025 and enters into effect on January 1, 2025.
The Group of Central Bank Governors and Heads of Supervision (GHOS) of the Bank for International Settlements has supported a worldwide standard for banks’ exposure to cryptocurrency assets. The guideline, which limits crypto reserves at banks to 2%, must be adopted by January 1, 2025, according to a Dec. 16 notice.
The report, titled “Prudent treatment of cryptoasset exposures,” introduces the final standard structure for banks regarding exposure to digital assets, such as tokenized traditional assets, stablecoins, and unbacked cryptocurrencies, as well as stakeholder feedback, gathered from a June consultation. The Basel Committee on Banking Supervision highlighted that the study would shortly be integrated into the Basel Framework as a new chapter.
BIS’s release emphasizes that the global banking system’s direct exposure to digital assets remains relatively limited; yet, recent events have highlighted “the significance of maintaining a robust minimum framework for globally active institutions to manage risks.” It also stated:
“We shall apply a strict prudential stance against unsupported cryptocurrencies and stablecoins with weak stabilisation procedures. The standard will establish a comprehensive and appropriate global regulatory framework for globally active institutions’ cryptoasset exposures that supports responsible innovation while safeguarding financial stability.”
The BIS revealed the findings of its multi-jurisdictional central bank digital currency (CBDC) trial in September, after a month-long testing phase that permitted $22 million in cross-border transactions. Twenty commercial banks from Hong Kong, Thailand, China, and the United Arab Emirates participated in the pilot initiative with their respective central banks. According to a June study by the BIS, over ninety percent of central banks are contemplating adopting CBDCs.