On 14 December 2023, the Basel Committee on Banking Supervision (Basel Committee) issued a consultative document setting out proposed amendments to its standard on banks’ exposures to cryptoassets.
In December 2022, the Basel Committee published its standard on the prudential treatment of banks’ exposures to cryptoassets. The standard is set out in a new chapter of the consolidated Basel framework, SCO60, that has an implementation date of 1 January 2025. When the cryptoasset standard was published in December 2022, the Basel Committee noted that certain issues would be subject to monitoring and review due to the rapid pace of market developments. Following reviews conducted during 2023, the Basel Committee proposes to update the requirements relating to banks’ exposures to stablecoins.
The proposed amendments change the requirements that determine whether banks can include the stablecoins to which they are exposed in the ‘Group 1b’ category. These changes relate to the composition of the reserve assets of stablecoins and the use of a statistical test by banks to assess the stability of the market value of stablecoins. As part of the proposals banks would be required to perform due diligence to ensure that they have an adequate understanding of the stabilisation mechanisms of stablecoins to which they are exposed and how effective they are. As part of this due diligence, banks would be required to conduct statistical or other tests demonstrating that the stablecoin maintains a stable relationship in comparison to the reference asset. The Basel Committee also proposes various technical amendments to help promote a consistent understanding of the cryptoasset standard which includes a set of answers to frequently asked questions.
The deadline for comments on the consultative document is 28 March 2024.