TL;DR

BIS Targets Stablecoins: The Bank for International Settlements (BIS) has issued amendments to its crypto asset standards, focusing on stablecoins like USDT and USDC.
Regulatory Preferences: Stablecoins on permissioned blockchains will receive favorable regulatory treatment, while those on permissionless blockchains face stricter scrutiny.
Industry Concerns: The crypto community fears that these changes could hinder the adoption of decentralized technologies and maintain banks’ control over financial systems.

The Bank for International Settlements (BIS) has set its sights on stablecoins like USDT and USDC, issuing targeted amendments to its crypto asset standards. These amendments, slated to take effect on January 1, 2026, prioritize stablecoins issued on permissioned blockchains over those on permissionless ones.

The BIS’s move aims to clarify the prudential treatment of stablecoins, granting preferential “Group 1b” regulatory status to those on permissioned blockchains. However, crypto industry observers worry that this decision could hinder the adoption of more decentralized, permissionless blockchain technologies.

Banks’ Unwillingness to Relinquish Power to USDT and USDC

Another community member shed light on the decision’s motivation. They explained that banks are reluctant to relinquish their advantage, asserting that permissioned blockchains allow them to maintain control. The fear is that banks and governments may resort to extreme measures to retain their power.

The BIS has updated its disclosure framework to incorporate uniform tables and templates that outline banks’ investments in crypto assets. These templates require detailed explanations about crypto asset operations and specific figures on capital and liquidity needs.

Specifically, stablecoins like Tether’s USDT and Circle’s USDC face significant regulatory challenges due to these new standards. The BIS’s stance means that stablecoins issued on permissionless blockchains will undergo more stringent scrutiny and could see restrictions imposed on their operation.

A Crackdown Looms

The Basel Committee on Banking Supervision recently published its latest disclosure report regarding banks’ involvement with crypto-assets. The report mandates that banks reveal their crypto activities and liquidity needs.

Additionally, it enforces more stringent standards for specific stablecoins to qualify for favorable regulatory treatment under “Group 1b,” starting from January 1, 2026. This change could have a significant effect on decentralized stablecoins such as USDT and USDC.

Industry Reactions

Caitlin Long, the CEO of Custodia Bank, expressed her disapproval of the BIS ruling, emphasizing that banks are now being pushed towards using permissioned stablecoins over permissionless ones. She also raised the possibility of the United States disregarding this decision, despite BIS’s historical influence in the crypto industry.

The Vitruvian Man, a prominent figure in the crypto community, proposed that banks are unlikely to give up their authority and dominance over financial systems without a fight. As the crypto community grapples with these regulatory shifts, stablecoin holders and industry players remain on high alert, closely monitoring the impact on their assets and operations.

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Filed under: News - @ July 18, 2024 1:10 pm