Banks: capital rules for crypto assets by the end of 2022

Banks: capital rules for crypto assets by the end of 2022

by Huw Jones

LONDON (Reuters) – The Basel Committee, which is responsible for the international coordination of banking regulation, will finalize before the end of the year the definition of “sound” rules for the provisions imposed on banks to cover potential losses related to crypto assets , its main regulator, announced on Tuesday.

The committee, which brings together regulators from the world’s major financial hubs, last year proposed a phased approach, notably imposing very strict rules on the deployment of “unsecured” crypto assets like bitcoin, considered the most risky.

Banks may therefore need to hold capital at least equal to their exposure to these types of assets in order to be able to absorb a full depreciation without damage.

The committee’s proposed approach, on the other hand, is more flexible for “stablecoins,” cryptoassets backed by traditional assets such as a major international currency.

But the collapse of the dollar-pegged TerraUSD in May could have challenged that approach, casting doubt on the perceived stability of the asset class.

“Regarding crypto-assets, members reiterated the importance of designing a robust and prudent regulatory framework for banks’ exposure to crypto-assets that encourages responsible innovation while protecting financial stability,” said the group of central bank governors and Officials from the banking supervisory authority (GHOS) in a press release.

“GHOS has directed the committee to complete such a framework by the end of the year.”

GHOS also “unanimously” called on all member countries to swiftly and fully implement the final part of “Basel III”, the set of rules defined after the global financial crisis of the late 2000s.

“The resurgence of inflation in many countries, combined with the deteriorating macroeconomic outlook and tightening financial conditions, may reveal accumulated weaknesses within the financial system,” the GHOS warns in its press release.

More than two-thirds of Basel Committee member countries plan to have fully implemented Basel II by the end of 2024, he added.

The European Union and the UK, both members of the Basel Committee and GHOS, have announced plans to implement the new rules by early 2025, but the EU has proposed several changes.

(Reportage Huw Jones, French version Marc Angrand, edited by Nicolas Delame)


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