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Basel Committee recommends introducing maturity limits for reserve assets in stablecoins

Inside advisory Released on December 14, the Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) proposed several targeted adjustments to standards for banks’ exposure to crypto assets.
The document is the result of review work conducted in 2023, which helped the Committee formulate changes to its original prudential standards on banks’ exposure to stablecoins. published In December 2022.
The proposed changes mainly concern the composition of stablecoin reserve assets, specifically crypto assets classified in Group 1b of the prudential standards and “subject to capital requirements based on underlying risk weights.”
The committee recommends intensifying redemption risks in times of extreme stress, when stablecoin issuers may face mass withdrawal calls and resulting sell-offs. The regulator proposes limiting stablecoin risk to higher maturities by introducing a maximum maturity limit for each reserve asset.
If long-term assets are allowed to be used as reserve assets, the committee believes that they would over-collateralize the claims of stablecoin holders. The amount of additional collateral should be sufficient to offset potential declines in the value of assets so that the stablecoin remains redeemable at its fixed value even in difficult times and in the presence of market fluctuations.
The document also highlights credit quality criteria, proposing a list of high credit quality reserve assets suitable for stablecoin issuers, including central bank reserves, government-backed securities and deposits in ‘high credit quality central banks and high credit quality banks’. .
The Commission will collect comments on the proposed changes until March 28, 2024. Whether or not it changes, the implementation date for prudential standards on stablecoin risks is January 1, 2025.
The Basel Committee includes central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervision. In October the Committee published a precedent advisory on prudential standards regarding stablecoin risks; This document proposed requiring banks to provide quantitative data on their exposure to crypto assets and related capital and liquidity requirements.

Translation by Walter Rizzo

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