Banks Allowed to Hold Up to 2% in Cryptocurrencies in Reserves from 2025.
A significant development in the cryptocurrency industry involves the establishment of a global standard permitting banks to incorporate cryptocurrency assets. This groundbreaking decision was officially approved by the Group of Central Bank Governors and Heads of Supervision (GHOS) of the Bank for International Settlements (BIS) at the highest level.
Key points regarding this standard include:
Percentage Allowance: Under the approved standard, banks are authorized to hold up to 2% of their reserves in cryptocurrencies. The implementation of this regulation is set to commence on January 1, 2025.
Comprehensive Framework: The report, titled "Prudential Treatment of Cryptoasset Exposures," outlines the final standard structure for banks concerning exposure to digital assets. This encompasses traditional assets, fixed currencies, and unsupported cryptocurrencies. The framework was developed based on feedback from stakeholders obtained during a consultation in June.
Risk Mitigation: Recognizing the importance of a robust framework, the BIS statement emphasizes the relatively low direct exposure of the global banking system to digital assets. The standard aims to mitigate risks associated with unsupported cryptocurrencies and stable currencies with ineffective stabilization mechanism.
Global Regulatory Framework: The standard provides a prudent and robust global regulatory framework for banks' cryptocurrency exposures on an international scale. It encourages responsible innovation while maintaining financial stability.
This decision reflects the commitment of global authorities to act in a coordinated manner to address emerging financial stability risks, as highlighted by Pablo Hernández de Cos, Chairman of the Basel Committee and Governor of the Bank of Spain.
The broader 2023-24 Work Programme adopted by GHOS aims to strengthen the regulation, supervision, and practices of banks globally, focusing on emerging risks, digitalization, climate-related financial risks, and the monitoring and implementation of Basel III.
Moreover, the BIS conducted a pilot program for central bank digital currencies (CBDCs) involving multiple countries and commercial banks, revealing promising results and indicating the growing interest in adopting CBDCs among central banks.