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The Basel Committee for Banking Supervision (BCBS) has put forth proposed changes to the criteria governing the preferential risk treatment of stablecoins compared to unbacked cryptocurrencies, such as bitcoin (BTC). This move is outlined in a consultative document released on Thursday, signaling a potential shift in the global regulatory approach to stablecoins.
While the BCBS has maintained its stringent stance on cryptocurrencies, with a maximum risk weight of 1,250% for free-floating digital assets like bitcoin, it is considering modifications specifically for stablecoins. The proposed changes aim to provide a more nuanced regulatory treatment for stablecoins with “effective stabilization mechanisms.”
Under the proposed revisions, stablecoins meeting the criteria for “effective stabilization mechanisms” could receive “preferential Group 1b regulatory treatment.” This implies that these stablecoins may be subject to “capital requirements based on the risk weights of underlying exposures as set out in the existing Basel Framework.” This stands in contrast to the stricter requirements imposed on more volatile assets like bitcoin.
Presently, stablecoins are required to be “redeemable at all times” to qualify for this preferential regulatory treatment. This prerequisite ensures that only stablecoins issued by supervised and regulated entities, featuring robust redemption rights and governance, are eligible for inclusion in this preferential category, as emphasized by the BCBS.
It’s important to note that the BCBS clarified in a statement that it will not be making changes to the existing standards for cryptocurrencies like bitcoin, maintaining the high-risk weight and capital allocation limits. The proposed revisions, if implemented, could represent a tailored approach to addressing the unique characteristics of stablecoins within the broader crypto regulatory framework.
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