Global regulators are reviewing rules for virtual currency banks as stablecoin prices soar

With the growing presence of stablecoins in the digital asset market, regulators around the world are reviewing banking rules governing holdings of crypto assets. The Basel Committee, which oversees global banking standards, is discussing possible adjustments to its prudential framework, which currently imposes conservative treatment on crypto exposures.

Under existing Basel standards, crypto assets are classified into groups with different risk treatments. While standard risk weights apply to tokenized traditional assets and eligible stablecoins, unbacked digital assets face stricter exposure limits designed to protect the stability of banking operations.

Banks are lobbying for more flexible crypto exposure rules to allow for greater participation in digital asset markets. Both institutions argue that the current framework may be too restrictive, given the evolving nature of stablecoins and their potential role in bank reserves.

The United States has pushed back against strict global cryptocurrency regulations by advocating for a more flexible stablecoin framework. The US GENIUS Act establishes a federal licensing regime for stablecoin issuers, requires full reserve backing, and prioritizes protection of holders in the event of bankruptcy.

Regulators are considering whether existing guidelines need to be updated due to the high risk of outflows associated with stablecoins. The review aims to balance financial innovation with stability concerns as fiat-pegged digital tokens become increasingly integrated into the traditional banking system.