The BIS offers support to the struggling cryptocurrency market.
Previously, the BIS allowed banks to hold up to 1% of their reserves in cryptocurrency.
As per the report, banks' total exposure to Group 2 digital assets should be limited to 2%.
The BIS recently released its Prudential Treatment of Cryptoasset Exposure report for December 2022. As per the official release, they have implemented a new policy that allows banks to hold 2% of their reserves in cryptocurrency.
The Bank for International Settlements is a central bank-owned international financial institution that promotes international monetary and financial cooperation and acts as a bank for central banks.
BIS has long been skeptical about the cryptocurrency industry. However, the bank has taken a number of steps this year to assist the struggling crypto industry.
This document is the result of the second consultation held in July on the prudential treatment of banks' exposure to crypto assets. Allowing banks to hold 1% of the reserve in cryptocurrency.
The BIS published this revised prudential standard in response to feedback. The policy will go into effect on January 1, 2025, and it covers several aspects of how crypto assets will be classified and treated.
The document further stated that a bank's overall exposure to Group 2 crypto assets shall not be higher than 2% of the bank's Tier capital at all times. Furthermore, the decision was highlighted in the Prudential Treatment of Cryptoassets exposure document, which was released earlier this month.
The BIS classified crypto assets using specific criteria. As a result, all crypto assets are divided into two categories. Crypto assets that do not match these criteria are assigned to Group 2. However, others who match those criteria are assigned to Group 1.
As a result, Group 2 crypto assets include stablecoins, unbacked crypto assets, and tokenized traditional assets that did not match those criteria. On the other hand, Group 1 crypto-assets have the same assets as indicated above but match the BIS’s criteria.
What are your thoughts on the new prudential report from the Bank for International Settlements? Share your thoughts in the comment section below.
