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Basel Committee Proposes Less Risky Status for Stablecoins Compared to Bitcoin

The Basel Committee on Banking Supervision (BCBS) has released proposals suggesting a revised categorization for cryptocurrencies, aiming to label stablecoins as less risky than certain other digital assets, particularly Bitcoin (BTC).

In a significant departure from its previous stance on cryptocurrencies, the BCBS has recommended potential changes to risk assessments, indicating that stablecoins might be considered less risky than fiat-based cryptocurrencies like Bitcoin.

Previously, the BCBS had advocated a notably stringent approach toward cryptocurrencies. For publicly traded digital assets such as Bitcoin, it suggested a maximum risk weight of 1,250%, mandating that banks hold capital in proportion to the perceived risks. Furthermore, banks were limited to allocating only 2% of their core capital to these riskier crypto assets.

However, the proposed amendments introduce the concept of “preferential Group 1b regulatory treatment” for cryptocurrencies with robust stabilization mechanisms, exemplified by stablecoins. This shift implies a potential relaxation of capital requirements for stablecoins, suggesting they could be subject to regulatory standards under the existing Basel framework, different from the stringent measures governing BTC and alternative cryptocurrencies.

The BCBS report emphasized that Group 1 cryptoassets, notably stablecoins, might face capital requirements aligned with the risk weights of their underlying exposures as stipulated in the current Basel standards framework.

This comes after the BCBS previously proposed comprehensive reporting requirements for banks regarding their involvement in cryptocurrency activities, aiming to cover various aspects related to cryptographic risks. The proposed disclosures encompass details of cryptocurrency-related activities, exposure, and liquidity requirements. The Committee intends to implement these mandatory reporting requirements by January 1, 2025.

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