The Bank for International Settlements (BIS) has just released its December 2022 Prudential Treatment of Cryptoasset Exposure report. They announced a new policy in it that allows banks to hold 2% of their reserves in cryptocurrency.
This document is the result of the second consultation held this summer on the prudential treatment of banks’ exposure to crypto assets. Allowing banks to hold a 1% reserve in cryptocurrency. The BIS developed this finalised “prudential standard” in response to feedback. The policy will go into effect on January 1, 2025, and it outlines various aspects of how crypto assets will be classified and treated.
BIS Approves Crypto Reserves for Banks
It’s been a cold crypto winter that has perfectly capped off an otherwise disappointing year for the industry. The collapse of FTX marked a precipitous deterioration in the performance of various digital assets. Now, the industry is attempting to move forward with a fresh look at the coming year and the market’s needs.
In the midst of the difficulties, the Bank for International Settlements has just announced a new policy that will allow banks to hold 2% of their reserves in cryptocurrency. Furthermore, the decision was highlighted in the Prudential Treatment of Cryptoassets exposure document, which was released earlier this month.
The BIS’s second consultation on the prudential treatment of banks’ exposure to crypto assets, released in June, outlined similar aspects of categorization. In contrast, that document enacted a policy allowing banks to keep 1% of their reserves in cryptocurrency. That has since been increased by one percentage point.
The document divides crypto assets into two groups: Group 1 and Group 2. The first category includes “tokenized traditional assets” as well as “digital assets with effective stabilization mechanisms.” Furthermore, Group 2 digital assets “fail to meet one of the classification conditions.”
Furthermore, the document specifies that banks’ exposure to group 2 crypto assets “must not exceed 2% of the bank’s Tier 1 capital” in their reserves. The development paves the way for banks to increase their cryptocurrency reserves. Specifically, within the BIS’s established thresholds.