Basel Crypto Rules: Global Regulators Review Stablecoin Standards

Global bank regulators are preparing to reassess the Basel crypto rules stablecoin standards after the United States and the United Kingdom rejected the framework’s most stringent measures. This development challenges the traditional unity of the Basel Committee on Banking Supervision (BCBS), which sets international banking guidelines.

Background: Basel Crypto Rules and Stablecoin Growth

The BCBS currently applies a 1,250% risk weighting to banks’ crypto exposures—the highest possible under Basel guidelines. This means financial institutions must match any exposure to certain crypto assets with an equal capital buffer, per the law firm White & Case. The rule primarily targets crypto assets issued on permissionless blockchains, including stablecoins such as USDt (USDT) and USDC (USDC), treating them on par with the riskiest venture capital investments.

Erik Thedéen, governor of Sweden’s central bank and BCBS chair, told the Financial Times that regulators may need “a different approach” due to the evolving market. He noted, “What has happened has been fairly dramatic,” referencing the strong increase in regulated stablecoin use and a change in the volume of assets, making a review necessary.

Regulatory Pushback and Differing Approaches

The US Federal Reserve and the Bank of England stated they will not implement the Basel crypto rules as currently written, with US regulators describing the capital requirements as unrealistic. The European Union has partially applied the 2022 Basel guidelines but has excluded major provisions affecting permissionless blockchains, further complicating efforts towards global alignment.

Anonymous sources told Bloomberg that the BCBS is expected to update its 2022 guidance next year, potentially offering banks a more favorable path to participating in crypto markets. Many financial institutions have interpreted the strict framework as a fundamental deterrent to offering cryptocurrency or stablecoin-related services.

Market Impact and Future Outlook

The ongoing resistance from major economies like the US and UK puts pressure on the BCBS to revisit its original stance. The increased adoption of regulated stablecoins in the US has intensified talks, especially after political support and the passage of the GENIUS Act, which permits the use of stablecoins for payments.

Thedéen acknowledged that “the increase in stablecoin adoption requires fresh analysis and a potentially more lenient stance.” He cautioned, however, that consensus on a revised framework could be difficult due to differing views within the Basel Committee on crypto risk profiles and the appropriate role for bank-issued digital assets.

The differences in policy implementation across jurisdictions could create competitive imbalances. If EU banks are required to adhere to the strictest mandates while their US and UK peers operate under more relaxed frameworks, the landscape for bank-issued stablecoins, tokenized deposits, and crypto custody could shift dramatically.

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Sources

Reporting via
Cointelegraph
and Financial Times.