Basel Committee considers stablecoins less risky than Bitcoin

2023-12-14 12:30:49

The Basel Committee on Banking Supervision (BCBS) has proposed that stablecoins be considered less risky cryptocurrencies.

According to the document, the BCBS proposes to change the criteria so that stablecoins can be considered less risky than fiat cryptocurrencies such as Bitcoin (BTC).

BCBS has so far taken a hard stance on cryptocurrency, recommending a maximum possible risk weight of 1,250% for publicly traded digital assets such as Bitcoin. This means banks must issue capital to match their risks. Banks are also not allowed to allocate more than 2% of their core capital to these riskier assets.

However, cryptocurrencies with “effective stabilization mechanisms,” such as stablecoins, are eligible for “preferential Group 1b regulatory treatment.”

This means that stablecoins could be subject to “capital requirements based on underlying risk weights as set out in the existing Basel standards framework,” instead of the more stringent requirements set for BTC and altcoins.

“Group 1 cryptoassets [stablecoins] are subject to capital requirements based on the risk weights of underlying exposures as set out in the existing Basel Framework.”

BCBS report

In October, the Basel Committee on Banking Supervision proposed mandatory reporting requirements for banks related to their cryptocurrency activities. According to the financial institution, the proposals cover both qualitative and quantitative aspects of cryptographic risks.

The disclosure includes information about the bank’s cryptocurrency-related activities, details of cryptocurrency exposure, and related liquidity requirements. The Committee intends to implement these disclosure requirements by Jan. 1, 2025.

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