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The reserve policy on crypto assets for banking institutions in Europe has been revised by the BIS (Bank for International Settlements). According to the new rule, European banks will be allowed to hold up to 2% of net assets in bitcoin.

The announcement was recently released by the BIS’ Group of Central Bank Governors and Heads of Supervision (GHOS). With the change, European financial institutions can hold up to US$ 3.6 trillion in crypto assets.

The measure will be valid from 2025 while the BIS studies the creation of a global regulation for crypto assets. According to GHOS director and Central Bank of Canada president Tiff Macklem, the report can be seen as a milestone towards the approval of such regulation globally, as well as citing the integration of crypto services by banking institutions.

“Today’s endorsement by GHOS marks an important milestone in developing a global regulatory baseline to mitigate the risks of crypto assets for banks. It is important to continue monitoring bank-related developments in the crypto asset markets.”

BIS to work on regulation until 2025

The BIS has released an activity report for the next biennium involving regulating the crypto market. In addition to legislation at the global level, the institution has increased bitcoin exposure for European banks, which could reach up to 2% over the next three years.

The report indicates a standard for handling crypto assets, although it cannot be understood as legislation. The chairman of the Basel Committee and president of the Bank of Spain, Pablo Hernández de Cos, says that the document can mitigate the risks related to exposure in crypto assets.

“The Committee’s standard on crypto assets is a further example of our commitment, willingness, and ability to act in a globally coordinated way to mitigate emerging financial stability risks. The Committee’s work programme for 2023–24 endorsed by GHOS today seeks to further strengthen the regulation, supervision, and practices of banks worldwide”.

In addition to citing exposure in crypto assets, the report talks about the differentiated treatment that unbacked stablecoins should be subjected to after a global regulatory framework is passed. The BIS press release advises that the document will serve as a standard for global regulation of these digital assets.

“The GHOS endorsed the Committee’s finalized prudential treatment of banks’ exposures to cryptoassets. Unbacked cryptoassets and stablecoins with ineffective stabilization mechanisms will be subject to conservative prudential treatment.”.

The entity also develops initiatives related to using digital currencies issued by central banks, also known as CBDCs. At the beginning of the second half of 2022, the BIS announced four technology centers focused on studying digital currencies.