Basel Committee on Banking Supervision makes minor update to digital asset rules

Getting your Trinity Audio player ready...

The Basel Committee on Banking Supervision (BCBS) has published an update to its digital asset standard for bank compliance and released the final disclosure framework for banks’ digital asset exposures.

The Committee had been consulting on its “cryptoasset standards,” originally published in December 2022, and the changes to the rules in the latest update appear less significant than previously mooted.

The BCBS is a committee of banking supervisory authorities that makes broad standards and guidelines for banking supervision worldwide. It operates under the auspices of the Bank for International Settlements (BIS), an international financial institution that promotes global monetary and financial stability by serving as a bank for central banks and a forum for international cooperation.

In its most recent consultation on digital asset standards, launched in December 2023, the BCBS raised the possibility of treating traditional digital securities on public blockchains as having the equivalent risk as digital currencies. This would have blocked banks from participating in tokenization initiatives on public blockchains because they would be prohibitively expensive.

However, the changes in the July 17 update don’t mention permissionless blockchains at all, which will come as welcome news for bank tokenization efforts.

The latest consultation also required banks’ reserve assets to be placed in structures that are “bankruptcy remote” from any party that issues, manages, or is involved in stablecoin operation or that custodies the reserve assets. However, the final standard included an exception to this requirement for banks that only provide custody services to stablecoins—in this case, cash does not need to be held in bankruptcy remotely from the bank’s other deposits.

In other words, as long as the bank isn’t the stablecoin issuer, its accounts can be used for stablecoin reserves.

In another change of heart, inspired by the consultation feedback, the BCBS decided to scrap plans to ban the use of securities financing transactions (SFTs)—such as reverse repurchase agreements—in stablecoin reserves. The ban would have relegated stablecoin issuers that use SFTs from the preferential “Group 1b” regulatory treatment into Group 2, where they would have been “subject to a new highly conservative capital treatment.”

However, the final digital asset standard permits stablecoin reserves to include “cash receivable under reverse repurchase agreements”—meaning money that is expected to be received back after temporarily lending out cash in exchange for securities, which will later be bought back at a higher price.

In terms of other minor amendments, the BCBS also clarified external audit requirements for stablecoin reserve assets, including a third-party verification at least twice a year and an external audit annually, and updated the clearing requirements for exchange-traded funds (ETFs) and exchange-traded notes (ETNs), which must now be centrally cleared.

Both the final disclosure framework for banks’ digital asset exposures and the updated digital asset standard for banks will come into force on January 1, 2026.

Watch Stefan Matthews: Blockchain is the perfect technology for regulatory compliance