The explosive rise of stablecoins has triggered pressure from U.S. banks and regulators on the Basel Committee to reconsider its stringent capital requirements for crypto assets.<\/p>\n
Despite being marketed as lower-risk digital currencies, stablecoins remain subject to the same harsh regulatory treatment as volatile cryptocurrencies under current Basel rules.<\/a><\/p>\n Erik Thed\u00e9en, chair of the Basel Committee on Banking Supervision, acknowledged in a Financial Times interview that the global framework needs recalibration.<\/p>\n However, he noted that conflicting perspectives among international regulators make consensus challenging.<\/p>\n The existing regulations mandate that banks maintain substantial capital reserves against potential crypto losses.<\/p>\n Following resistance from the U.S. and U.K. to adopt these standards, the stablecoin surge has intensified demands for reform.<\/p>\n \u201cWhat has happened has been fairly dramatic,\u201d Thed\u00e9en remarked.<\/p>\n The Swedish central bank governor added that the stablecoin boom and their growing market presence necessitate a fresh regulatory perspective.<\/p>\n Riksbank Governor Erik Thedeen. | Source: Reuters<\/p>\n The Basel Committee currently imposes a 1,250% risk weight on bank holdings of unbacked crypto assets, such as Bitcoin and Ethereum, classifying them as among the most hazardous assets under global banking standards.<\/p>\n These regulations, finalized three years ago, are scheduled to take effect on January 1.<\/p>\n Under this framework, banks must reserve $1.25 in capital for every $1 of crypto they hold, rendering direct crypto engagement financially unfeasible for most financial institutions.<\/p>\n Consequently, banks have avoided holding or providing loans against these assets, keeping crypto largely off institutional balance sheets.<\/p>\n This harsh approach, initially intended as a protective measure, is now being reassessed as stablecoin use expands and major economies pursue divergent regulatory paths.<\/p>\n Last year, the Basel Committee revised its standards to subject all crypto assets operating on permissionless blockchains to maximum capital restrictions.<\/p>\n This revision captures widely-used stablecoins such as Tether\u2019s USDT and Circle\u2019s USDC under the 1,250% risk weighting.<\/p>\n \u201cThe focus back then was very much on the bitcoins of this world,\u201d Thed\u00e9en explained.<\/p>\n \u201cNo, of course, everyone is talking about stablecoins. Permissionless ledgers: Are they as risky as we thought? Or is there an argument we can look at this in a different way? We need to start analysing. But we need to be fairly quick on it.\u201d<\/p>\n Financial institutions are mounting pressure on regulators to revise these standards.<\/p>\n In August, Wall Street groups contacted<\/a> the Basel Committee, cautioning that current crypto regulations make bank participation in digital asset markets economically impractical.<\/p>\n Per the FT, the U.S. Federal Reserve, through Michelle Bowman, the Fed\u2019s vice-chair for supervision, stated last month that the Basel risk weights won\u2019t be implemented because they lack practical grounding.<\/p>\n The Bank of England has similarly opted<\/a> against implementing the rules as currently structured, according to an informed source.<\/p>\n Japan has also joined the resistance.<\/p>\n Minoru Aosaki, who leads the international office at Japan\u2019s Financial Services Agency, told Central Banking during a Tokyo interview that Japan will not adopt the Basel Committee\u2019s crypto asset standards.<\/p>\n The EU has adopted portions of the framework<\/a> but excluded sections addressing permissionless ledgers and related capital requirements.<\/p>\n Bloomberg, however, has reported that the Basel Committee plans to revise its 2022 framework next year with more accommodating terms for banks entering crypto markets.<\/p>\n According to the report, numerous banks viewed the existing rules as actively discouraging involvement with cryptocurrency and stablecoin services.<\/p>\n Nevertheless, Thed\u00e9en cautioned that achieving regulatory consensus remains difficult due to fundamental disagreements about crypto risk levels and the appropriate role for bank-issued digital currencies.<\/p>\n \u201cGoing further than that at this point in time is difficult, because I\u2019m the chair and there are so many different views in this committee,\u201d he said.<\/p>\n Read original story Stablecoin Boom Forces Basel Committee to Rethink Punishing Bank Rules<\/a> by Anas Hassan<\/a> at Cryptonews.com<\/p>\n","protected":false},"excerpt":{"rendered":"The explosive rise of stablecoins has triggered pressure from U.S. banks and regulators on the Basel Committee to…\n","protected":false},"author":2,"featured_media":11393,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[77,7022,6436,8610,8611,8609,8608,8613,8612],"class_list":{"0":"post-11392","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-basel","8":"tag-basel","9":"tag-basel-committee","10":"tag-capital-requirements","11":"tag-crypto-assets","12":"tag-crypto-regulations","13":"tag-digital-currencies","14":"tag-erik-thedeen","15":"tag-global-framework","16":"tag-international-regulators"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/11392","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=11392"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/11392\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/11393"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=11392"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=11392"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=11392"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}