A&O Shearman | FinReg | Amendments Proposed to Global Standard for Banks’ Exposures to Crypto-Assets
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  • Amendments Proposed to Global Standard for Banks’ Exposures to Crypto-Assets

    Following publication of the final bank prudential requirements for exposures to crypto-assets, the Basel Committee on Banking Supervision is consulting on proposed amendments to the requirements for exposures to stablecoins. The consultation closes on March 28, 2024. The Basel Committee does not state whether these proposals, if they proceed, would need to be implemented by January 1, 2025, which is the implementation date for the final standard for banks' exposures to crypto-assets.

    The Basel Committee's final requirements for exposures to crypto-assets apply different prudential approaches depending on whether a crypto-asset meets certain conditions. Crypto-assets that meet all of the conditions are referred to as "Group 1 crypto-assets" and, within that group, stablecoins fall within Group 1b. The Basel Committee is proposing changes to the requirements that determine whether a bank can include a stablecoin exposure in the Group 1b category. First, the Committee is proposing changes to the composition of reserve assets of stablecoins that will enhance the asset quality criteria for reserve assets under the redemption risk test and provide additional safeguards for reserve assets. Secondly, the Committee proposes that banks should be required to perform due diligence, at the point of acquisition and regularly thereafter, that provides the bank with an adequate understanding of the stabilization mechanism and its effectiveness. Statistical tests will be required as part of the due diligence. A regulator would be capable of overriding a bank's categorization of its exposure on the basis of those test results.

    In addition, the Committee is proposing technical amendments to the final standard and a set of FAQs regarding the crypto-asset requirements, which would be added to the final standard. The Committee also confirms that bank exposures to crypto-assets on permissionless blockchains will not be added to the Group 1 category.

    This consultation is separate to the Basel Committee's proposals relating to disclosure templates published on October 17, 2023, which closes at the end of January 2024.

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