The Basel Committee recommends the introduction of maturity limits for stablecoin reserve assets

In a consultation document published on December 14, the Basel Committee for the Bank of International Settlements (BIS) proposed a number of measures aimed at adjusting banks' exposure to crypto-assets.

The document is the result of review work carried out in 2023, which helped the committee prepare amendments to banks' exposure to stablecoins, published in December 2022.

Proposed changes mainly relate to the composition of stablecoins' reserve assets, especially for crypto assets classified as Group 1B prudence level, “subject to capital requirements based on the weight of the underlying risk.”

The committee suggested that stable coin issuers would be forced to exit and face massive claims for fire sales to target redemption risks during the high stress. The regulatory body suggests limiting stablecoin exposure to long maturities by introducing maximum maturity limits for individual reserve assets.

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If long-term assets are allowed as standby assets, the Committee believes that these would unduly align the claims of Stablecoin holders. The amount of collateral must be sufficient to offset potential declines in asset values ​​so that a stable coin can be redeemed at its stated value even in difficult times and volatile markets.

The document highlights the criteria for credit quality, including a list of high credit quality reserve assets suitable for stablecoin issuers, central bank reserves, high credit quality marketable securities by buyers and central banks, and deposits in high credit quality banks. It suggests. .

The committee will collect comments on the proposed amendments until March 28, 2024. Amended or not, prudential standards for stablecoin exposure will go into effect on January 1, 2025.

The Basel Committee is made up of central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervision issues. In October 2023, it issued a preliminary consultation paper on the risk prudence requirements for stablecoins. That document required banks to provide quantitative information on their exposure to crypto assets and related capital and liquidity requirements.

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