Basel Committee To Produce A Second Consultation Paper On Cryptocurrencies

The Basel Committee on Banking Supervision (BCBS) wants to finalize its treatment of digital assets including cryptocurrencies by the end of the year and has planned to produce a second consultation paper on the same.

The BCBS was established decades ago as a global standard-setter for banking regulation. The recent surge in the popularity of digital assets did not go unnoticed when BCBS met on May 27 to discuss multiple topics including crypto assets and it has decided to issue a second consultation paper on the "prudential treatment of banks' crypto asset exposures."

"Recent developments have further highlighted the importance of having a global minimum prudential framework to mitigate risks from crypto assets," the committee said possibly referencing the collapse of the LUNA (now LUNC) and UST tokens.

The first consultation report by the body was released last year, which imposed strict capital requirements for banks that have exposure to Bitcoin (BTC) and other crypto assets. The paper discussed two aspects: the first included tokenized assets and stablecoins while the second included Bitcoin and other cryptocurrencies.

"Building on the feedback received by external stakeholders, the committee plans to publish another consultation paper over the coming month, with a view to finalizing the prudential treatment around the end of this year," it said in a statement.

In addition to cryptocurrencies, the Basel Committee also established principles for the effective management and supervision of climate-related financial risks and discussed the risks and vulnerabilities to the global banking system after the war between Ukraine and Russia started.