Unbacked crypto assets and stablecoins with ineffective stabilization mechanisms continue to be subject to a conservative prudential treatment, with a new limit proposed on gross exposures. The Basel Committee on Banking Supervision (BCBS) invites submissions on the proposals by 30 September and aims to finalize the standard around the year-end.
It builds and on and maintains the basic structure of the proposal in the first consultation, with crypto assets divided into two broad groups: Group 1 includes those eligible for treatment under the existing Basel Framework with some modifications. Group 2 includes unbacked crypto asset and stablecoins with ineffective stabilization mechanisms, some of which are subject to a new conservative prudential treatment (1250% risk weight).
The updated proposals provide more detail on the proposed standard and include new elements such as an infrastructure risk add-on to cover the new and evolving risks of distributed ledger technologies; adjustments to increase risk sensitivity; and an overall gross limit on Group 2 crypto assets.
Given the rapid evolution and volatile nature of the crypto asset market, the Committee will continue to closely monitor developments during the consultation period. The standards that the Committee aims to finalize around year-end may be tightened if shortcomings in the consultation proposals are identified or new elements of risks emerge and based on the Committee’s overall assessment of the risks.