How Basel Committee’s latest ruling will affect Tether, USDC, other stablecoins

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  • Amended Crypto Asset Standard gives preferential treatment to permissioned stablecoins
  • Many in the crypto community have criticized the amendments for favoring banks

As a seasoned researcher with extensive experience in the crypto space, I’ve observed the dynamic regulatory landscape shaping the industry from close quarters. The recent wave of regulatory announcements, including the CFTC’s classification of ETH and BTC as non-securities and the Basel Committee’s amended crypto asset standards, has stirred up quite a storm in the community.

Over the past few months, regulatory bodies have weighed in on several crypto assets with clear opinions emerging. For example, the Commodity Futures Trading Commission (CFTC) classified Ethereum, Bitcoin, and around 80% of cryptocurrencies as non-securities this month. In contrast, the Securities and Exchange Commission (SEC) maintains a different viewpoint, regarding most of these digital assets as securities.

Simply put, a sustained discussion is widely shaping the cryptocurrency space right now.

One recent development is the new regulation set by the Basel Committee, allowing permitted stablecoins special consideration in the revised cryptocurrency asset framework.

Basel Committee’s amended Crypto Standards

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The Basel Committee, which is responsible for establishing banking regulations, has unveiled an updated version of its cryptographic asset rules. According to their determination, stablecoins that operate under a permissioned system, like JPM Coin, fall into Class 1b.

The classification regarding Group 1b states that,

“Depending on the risk assessment of the underlying exposures as outlined in the current Basel Framework, subject to the necessary capital provisions.”

As someone who has spent years working in the financial industry, I’ve seen firsthand how important it is for traditional financial institutions to manage risk carefully. That’s why I understand why regulatory bodies have classified stablecoins like Tether’s USDT and USDC as belonging to Group 2. This classification means these stablecoins are subject to conservative capital treatment, which limits the exposure banks can have to them.

In simpler terms, the classification means that banks must implement stringent guidelines when dealing with these assets.

Crypto community’s reaction

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Following the latest decision by the Basel Committee, there has been significant criticism from the cryptocurrency sector. Many parties believe that the Bank for International Settlements is attempting to suppress tokenized cash markets in favor of conventional banking institutions.

As a researcher studying privacy technologies, I’ve come across Austin Campbell, the founder of Zero Knowledge. On his X page, he expressed his disagreement with this particular action.

As an analyst, I find it unsurprising that the Bank for International Settlements (BIS) is attempting to manipulate the tokenized cash market for banks. Given that the acronym BIS represents “Bank,” it aligns with my prediction made on the Intangible Coins podcast that private bank chains could be a dead-end. This behavior, aiming to win through rigged games rather than fair competition, is unfortunately not unexpected in such circumstances.

A wave of crypto regulations

Over the past few months, cryptocurrency regulations have been adopted in various parts of the world. Notably, the European Union introduced MiCA (Markets in Crypto-Assets), a set of regulations that significantly affected Tether’s USDT.

Based on my extensive background in the cryptocurrency industry and having closely monitored global regulatory developments, I can tell you that recent news from Russia is particularly intriguing. As reported by AMBCrypto, this country is pushing a new mining bill that could significantly impact individual crypto miners while granting state control over the digital currency markets.

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Across the globe, Argentina and South Korea have put forth fresh proposals for crypto regulations. Notably, Argentina’s new rules could significantly influence stablecoins given its plans to shift towards a dollar-based economy.

Impact on stablecoins

The latest decision is likely to significantly shape the future of stablecoin markets. A potential decrease in institutional investments, for instance, in USDT, could transform the market dynamics as mentioned by Amit Jaswal on platform X.

“It’s intriguing that the Basel Committee has made this decision. Granting favored status to permitted stablecoins could significantly alter the cryptocurrency market landscape.”

As a market analyst, I would express it this way: My analysis indicates that this move could negatively impact stablecoins, potentially undermining the stability of the stablecoin market. Consequently, we may witness decreased inflows and diminished institutional interest in these digital assets.

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2024-07-21 04:08