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Basel Committee Consults on Prudential Treatment of Crypto Asset Exposures

  • Basel Committee issues public consultation on preliminary proposals for the prudential treatment of banks’ crypto asset exposures.
  • The proposals split crypto assets into two broad groups: those eligible for treatment under the existing Basel Framework with some modifications; and others, such as bitcoin, are subject to a new conservative prudential treatment.
  • The Committee invites submissions on the proposals by 10 September.

The Basel Committee on Banking Supervision has issued a public consultation on preliminary proposals for the prudential treatment of banks’ crypto asset exposures. While banks’ exposures to crypto assets are currently limited, the continued growth and innovation in crypto assets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment.

Given the rapidly evolving nature of this asset class, the Committee said it believes that policy development for crypto asset exposures is likely to involve more than one consultation. This initial public consultation, which follows a discussion paper published in December 2019, will allow further work to continue with the additional benefit of incorporating feedback from external stakeholders, according to BIS.

The proposed prudential treatment outlined in the consultation divides crypto assets into two broad groups:

  • Group 1 crypto assets – these fulfill a set of classification conditions and as such are eligible for treatment under the existing Basel Framework (with some modifications and additional guidance). These include certain tokenized traditional assets and stablecoins.
  • Group 2 crypto assets – are those, such as bitcoin, that do not fulfill the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment.

BIS said Central bank digital currencies are not within the scope of the consultation.

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