A committee of central bank governors has called on fellow banking supervisors to establish a prudential framework for cyrptoassets before the end of the year.
The call from the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, comes at a time of tightening in the market.
In addition to global geopolitical instability, surging inflation and a deterioration in macroeconomic conditions, the committee also noted that the unwinding of economic support measures enacted during the pandemic “places greater importance on the resilience of the banking sector to absorb potential shocks”.
The GHOS issued its first proposal back in June 2021. This was then followed up with a second consultation document in June 2022.
The basic structure of the proposed framework is to divide cryptoassets into two broad categories – one for those eligible for treatment under the existing Basel risk capital framework and another for those unbacked cryptocurrencies and stablecoins that will impose more conservative prudential treatment.
The June proposals also cover new and evolving risks of distributed ledger technologies, adjustments to increase risk sensitivity and an overall gross limit on unbacked cryptoassets.