Bank of International Settlements Tightens Rules on Stablecoins

The Bank for International Settlements (BIS) has introduced new regulations that could significantly impact stablecoins like Tether’s USDT and Circle’s USDC, both of which operate on public blockchains.

On July 17, the Basel Committee on Banking Supervision released a report detailing new requirements for banks’ crypto-asset exposures. Banks must now provide extensive disclosures about their crypto activities and meet strict liquidity standards.

The BIS has tightened the criteria for stablecoins eligible for favorable “Group 1b” regulatory treatment, likely imposing stricter controls on USDT and USDC.

This development coincides with the Hong Kong Monetary Authority’s release of consultation papers on a stablecoin licensing regime. Industry leaders have expressed concerns, with Custodia Bank CEO Caitlin Long criticizing the BIS for excluding public blockchain stablecoins and favoring permissioned ones. She suggested that the US might not follow these new guidelines.

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In contrast, at a recent Coinbase event, BlackRock’s Head of Digital Assets expressed a preference for public blockchains over private ones. However, the BIS’s guidance encourages banks to use permissioned stablecoins like JPMorgan’s JPMCoin. State Street is also reportedly planning to launch a stablecoin, potentially further challenging the market position of public blockchain stablecoins.

Fox Business’s Eleanor Terret reported that the BIS’s final guidance excluded USDC and other public blockchain stablecoins from the favorable regulatory category initially proposed.

Alexander Stefanov