Basel Committee Finalizes Rules on Banks’ Exposure to Cryptocurrency Assets

The document establishes two different classes of cryptoassets, including real tokenized assets and stablecoins in one and other cryptocurrencies in the other, and distinguishes between collateral and how much banks can hold for each.

Basel Committee sets final rules for cryptocurrency exposure

As banks have entered the arena of cryptocurrency services, standards bodies are now defining the means by which traditional financial institutions will be able to hold cryptocurrencies. The Basel Committee, which is the standard-setting body for banks globally, has finalized the rules that will define the requirements for banks to be allowed to have exposure to cryptocurrencies, dividing assets into two different groups.

The first group includes stablecoins and tokenized assets, while the second includes other cryptocurrencies.

Among the new guidelines announced on December 16 by the institution is the establishment of the maximum amount of crypto that banks can hold. It is recommended to set it at 1% of their Tier 1 capital, which includes these institutions’ core assets, such as reserves and shares. However, the Basel Committee sets the maximum amount of crypto that banks can hold at 2%.

Stablecoins, which are part of the first group, must comply with strict rules to be considered as such and cannot be accepted as collateral.

Framework development

This new set of rules is the result of the third consultation among members of the group after receiving strong criticism for some of the decisions adopted during the second iteration of this set of rules, which was published on June 30. For example, the latest version of the document includes hedging cryptocurrency assets and specifies a 100% capital requirement for it, while the previous version did not mention it.

Commenting on the importance of this framework for cryptocurrencies, Pablo Hernandez de Cos, Chairman of the Basel Committee and Governor of the Bank of Spain, said:

The Committee’s standard for cryptoassets is another example of our commitment, willingness and ability to act in a coordinated manner globally to mitigate emerging risks to financial stability.

In October, the Basel Committee determined that banks worldwide were exposed to $9 billion worth of cryptocurrency assets.

The cryptocurrency rules will come into effect on January 1, 2025 and will be subject to further changes as the committee monitors the behavior of the cryptocurrency situation with banks.

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