Proposed Changes to Global Banking Regulations Could Impact Stablecoin Risk Treatment

• The Basel Committee for Banking Supervision has proposed new, stricter criteria for stablecoins.

• The new standards are aimed at ensuring that stablecoins’ reserve assets have the short-term maturity, high credit quality, and low volatility necessary to meet holder expectations for redemption, said the regulator.

The proposed changes aim to mitigate the risks associated with stablecoins by imposing more stringent standards for their reserve assets. These changes are part of the Basel Committee’s effort to differentiate between stablecoins and more volatile, unbacked cryptocurrencies like bitcoin (BTC).

If adopted, the proposed standards would require stablecoin reserve assets to meet a range of criteria, including having a short-term maturity, high credit quality, and low volatility. The consultation period for these proposed changes runs until March 28, giving stakeholders the opportunity to provide feedback on the new criteria.

While the Basel Committee has historically taken a tough stance on crypto, the proposed changes aim to provide preferential regulatory treatment for stablecoins with “effective stabilization mechanisms.” This means that stablecoins meeting the new criteria would be subject to different capital requirements compared to other, riskier cryptocurrencies.

Stablecoins that fail to meet the Basel Committee’s conditions would be subject to a new, highly conservative capital treatment, placing them in a separate regulatory category.

Overall, the proposed changes signal the Basel Committee’s intent to enhance regulatory oversight of stablecoins, aiming to ensure that their reserve assets are resilient to various risks and capable of meeting redemption demands.

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