Basel Committee consults on prudential treatment of banks’ cryptoasset exposures

The proposals split cryptoassets into two broad groups: those eligible for treatment under the existing Basel Framework with some modifications; and others, such as bitcoin, are subject to a new conservative prudential treatment.

The Basel Committee on Banking Supervision today issued a public consultation on preliminary proposals for the prudential treatment of banks’ cryptoasset exposures. While banks’ exposures to cryptoassets are currently limited, the continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, „could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment”.

Given the rapidly evolving nature of this asset class, the Committee believes that policy development for cryptoasset exposures is likely to involve more than one consultation. This initial public consultation, which follows a discussion paper published in December 2019, will allow further work to continue with the additional benefit of incorporating feedback from external stakeholders.

The proposed prudential treatment outlined in the consultation divides cryptoassets into two broad groups:

Group 1 cryptoassets – these fulfil a set of classification conditions and as such are eligible for treatment under the existing Basel Framework (with some modifications and additional guidance). These include certain tokenised traditional assets and stablecoins.

Group 2 cryptoassets – are those, such as bitcoin, that do not fulfil the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment.

Central bank digital currencies are not within the scope of the consultation.

The Committee welcomes comments on the proposals, which should be submitted here by 10 September 2021. All submissions will be published on the BIS website unless a respondent specifically requests confidential treatment.