Central banks endorse a global standard for exposure to crypto assets

The Group of Central Bank Governors and Heads of Supervision (GHOS) of the Bank for International Settlements (BIS) has endorsed a limit of 2% on crypto reserves among banks as part of a report named Prudential Treatment of Cryptoasset Exposures. According to cointelegraph.com, the standard would come into effect on 1 January 2025. 

The report details a final standard structure for banks regarding exposure to digital assets, including tokenized traditional assets, stablecoins, and unbacked cryptocurrencies. It also includes stakeholder feedback that was collected during a consultation in June 2022. 

While the announcement from BIS revealed the relatively low direct exposure to digital assets of the global banking system, it also highlighted the importance of having a strong minimum framework for internationally active banks to mitigate risks. 

Representatives from the Bank of Spain cited by cointelegraph.com emphasised the Committee’s efforts to mitigate emerging financial stability risks, as well as a goal to further strengthen the regulation, supervision and practices of banks worldwide. Tackling emerging risks, digitalisation, and climate-related financial risks, as well as monitoring and implementing Basel III will remain top priorities of the Committee. 

BIS officials cited by the same source detailed how the standard aims to provide a robust and prudent global regulatory framework for internationally active banks' exposures to cryptoassets. The standard can also promote responsible innovation without disturbing financial stability.

BIS’s multi-jurisdictional CBDC pilot

According to cointelegraph.com, in September 2022, the Bank for International Settlements has revealed the results of its multi-jurisdictional central bank digital currency (CBDC) pilot. The testing phase lasted for a month and facilitated USD 22 million worth of real-value cross-border transactions. Furthermore, more than USD 12 million worth of value was issued onto the test platform. This supported 164 foreign exchange transactions and cross-border payments between the participating firms. 

The pilot programme saw the participation of the central banks of Hong Kong, Thailand, China, and the United Arab Emirates, as well as 20 commercial banks from the same regions. BIS officials explained that the pilot focused on wholesale CBDC cross-border payments and the role central banks can have on the platform. 

Following the completion of the platform’s first pilot, the project moved to its third and final stage. Once that stage completes, there are plans to release a core functionality only version of the product.