The Bank for International Settlements (BIS) introduced new regulations that could create significant changes in the cryptocurrency market. The report published by the Basel Committee on Banking Supervision on July 17 mandates stricter rules for banks to manage cryptocurrency risks and requires comprehensive disclosures. These new regulations aim to increase transparency and stability, particularly affecting stablecoins like Tether’s USDT and Circle’s USDC.
Details of the New Regulations
An important aspect of the new regulations includes tightened criteria for stablecoins to qualify for favorable “Group 1b” regulatory treatment. This move will ensure that stablecoins like USDT and USDC are kept under stricter controls and may make it harder for them to meet the necessary requirements.
BIS’s step reflects increasing regulatory concerns about the risks associated with publicly used Blockchain stablecoins in the cryptocurrency market. The timing of these regulations is noteworthy as it coincides with the Hong Kong Monetary Authority’s release of consultation documents on the stablecoin licensing regime.
Industry leaders have expressed concerns over these developments, with Custodia Bank CEO Caitlin Long criticizing BIS for favoring permitted stablecoins while excluding publicly used Blockchain stablecoins. Long highlighted the potential for regulatory differences among major financial jurisdictions, suggesting that the United States might not comply with these new guidelines.
Diverse Opinions on BIS’s Stance
Contrary to BIS’s stance, there are influential voices in the financial sector advocating for the use of public Blockchains. BlackRock’s Head of Crypto Assets expressed a preference for public Blockchains over private ones. This view highlights ongoing debates within the financial sector about the benefits and risks of different Blockchain architectures. Nevertheless, BIS’s guidelines favor permitted stablecoins operating on private Blockchains, such as JPMorgan’s JPMCoin.
As discussions continue, State Street plans to launch a stablecoin. If successful, this move could bring more competition from established financial institutions, challenging the dominance of public Blockchain stablecoins. BIS’s regulatory framework could reshape the competitive landscape, driving more banks and financial institutions towards permitted stablecoins.
These new regulations and the industry’s response to them have the potential to bring significant changes to the cryptocurrency market. The competition between public Blockchain stablecoins and permitted stablecoins could shape the future structure of the financial system.
