tl;dr
The Bank of International Settlements (BIS) has issued new guidance tightening its criteria for permissionless stablecoins, including Tether's USDT and Circle's USDC. The Basel Committee on Banking Supervision published a report requiring banks to disclose crypto-related activities and liquidity req...
BIS issues new guidance targeting stablecoins like USDT and USDC. Banks are required to disclose crypto-asset exposure and face stricter criteria for stablecoins. Severe restrictions expected for permissionless stablecoins such as USDT and USDC. Industry veterans express dismay over BIS decision favoring permissioned stablecoins. BIS guidance encourages the use of permissionless stablecoins, impacting USDT and USDC.
The Bank of International Settlements (BIS) has issued new guidance tightening its criteria for permissionless stablecoins, including Tether's USDT and Circle's USDC. The Basel Committee on Banking Supervision published a report requiring banks to disclose crypto-related activities and liquidity requirements. Certain stablecoins will face stricter regulations, potentially impacting their functioning. Industry veterans have criticized BIS for favoring permissioned stablecoins over permissionless ones. The guidance encourages banks to use only permissionless stablecoins, like JPMorgan's JPMCoin, while excluding stablecoins issued on permissionless blockchains. This development coincides with the Hong Kong Monetary Authority's consultation papers on a licensing regime for stablecoin issuers. All stablecoins issued on permissionless blockchains such as Tether’s USDT and Circle’s USDC face the danger of major regulatory wrath ahead as the Bank of International Settlements (BIS) has issued new guidance tightening its criteria over permissionless stablecoins.
On Wednesday, July 17, the Basel Committee on Banking Supervision published its final disclosure report for the banks’ crypto-asset exposure. As a result, banks will need to disclose qualitative and quantitative reports on their crypto-related activities and the liquidity requirements to maintain stability. BIS has tightened up the criteria for certain stablecoins that will receive a preferential “Group 1b” regulatory treatment. This means that there could be severe restrictions on the functioning of permissionless stablecoins such as Tether’s USDT, Circle’s USDC, and others. Interestingly, this development comes on the same day when the Hong Kong Monetary Authority released consultation papers on a licensing regime for stablecoin issuers.
Caitlin Long, CEO of Custodian Bank, expressed her dismay over the recent decision by BIS stating that they have now excluded stablecoins issued on permissionless blockchains from use by banks while favoring permissioned stablecoins instead. She further commented that the United States is likely to disregard this development, stating, “The US will almost certainly just ignore this. It’s a shame tho–BIS was leading the US on crypto but just went backward.” At Coinbase’s State of Crypto event last month, BlackRock’s Head of Digital Assets stated that the asset manager now believes public blockchains are superior to private ones. However, the new guidance from the Bank for International Settlements (BIS) encourages banks to use only permissionless stablecoins, such as JPMorgan’s JPMCoin. Interestingly, banking firm State Street is reportedly planning for a stablecoin launch. This could be another major blow to permissionless stablecoins like USDT.