Basel Committee publishes second consultation document on the prudential treatment of banks' cryptoasset exposures

• The Basel Committee's second public consultation on the prudential treatment of banks' cryptoasset exposures builds on the proposals in the first consultation issued in June 2021.
• Unbacked cryptoassets and stablecoins with ineffective stabilisation mechanisms continue to be subject to a conservative prudential treatment, with a new limit proposed on gross exposures.
• The Committee invites submissions on the proposals by 30 September and aims to finalise the standard around the year-end.

The Basel Committee on Banking Supervision today issued a second public consultation on the prudential treatment of banks' cryptoasset exposures. 

The basic structure of the proposal in the first consultation is maintained, with cryptoassets divided into two broad groups: Group 1 includes those eligible for treatment under the existing Basel Framework with some modifications. Group 2 includes unbacked cryptoasset and stablecoins with ineffective stabilisation mechanisms, which are subject to a new conservative prudential treatment.

The updated proposals provide more detail on the proposed standard and include new elements such as an infrastructure risk add-on to cover the new and evolving risks of distributed ledger technologies; adjustments to increase risk sensitivity; and an overall gross limit on Group 2 cryptoassets.

Given the rapid evolution and volatile nature of the cryptoasset market, the Committee will continue to closely monitor developments during the consultation period. The standards that the Committee aims to finalise around year-end may be tightened if shortcomings in the consultation proposals are identified or new elements of risks emerge and based on the Committee's overall assessment of the risks.

The Committee welcomes comments on the proposals, which should be submitted here by 30 September 2022.