BIS Allows Banks to Hold 2% Of Their Reserves in Cryptocurrencies
- BIS has released its Prudential Treatment of Crypto Asset exposure report for December 2022.
- From Jan 1 2025, banks can hold 2% of their reserves in cryptocurrencies.
- The report warns banks that non-compliance of AML or CFT laws can cause operational losses.
The Bank for International Settlements (BIS) has now allowed banks to now hold 2% of their reserves in cryptocurrencies as per its recently released Prudential Treatment of Crypto Asset exposure report for December 2022. In June, the BIS had allowed only a few banks to hold not more than 1% of their reserves in cryptos.
The policy which will be effective from January 1st, 2025, also defines crypto assets and the manner in which they can be processed.
The report has categorized cryptocurrencies under groups called Group 1 and Group 2. The Group 1 asset includes tokenized traditional assets and digital assets which have effective stabilization mechanisms. Meanwhile, Group 2 has digital assets that do not conform to any of the classification terms and conditions.
Thus, the report suggests that bank’s financial exposures to Group 2 crypto assets must not be more than 2% of the bank’s Tier 1 capital, within their reserves.
The new policy, thus, allows banks and financial organizations to experiment into different cryptocurrencies to increase thei …
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