ISDA Urges BCBS to Recalibrate Crypto Standards

Joint Trades Submit Letter to BCBS Calling for Recalibration of Cryptoasset Prudential Standards

Introduction

The International Swaps and Derivatives Association (ISDA), in collaboration with a coalition of leading global financial trade associations, has submitted a letter to the Basel Committee on Banking Supervision (BCBS). This letter, supported by advisory input from Boston Consulting Group (BCG), Ashurst, and Sullivan & Cromwell, calls for a pause and recalibration of the Cryptoasset Exposures Standard, known as SCO60. The Joint Trades argue that the current standard imposes overly conservative and punitive capital requirements that do not accurately reflect the actual risks of cryptoassets.

Background

The Basel Committee on Banking Supervision (BCBS) is responsible for setting global standards for the regulation of banks. The Cryptoasset Exposures Standard (SCO60) is scheduled for implementation in January 2026. However, the Joint Trades are urging BCBS to delay this implementation to allow time for a targeted consultation and redesign of the framework. They argue that the current standard is inconsistent with established market risk practices and does not align with the actual risk profiles of cryptoassets.

Recommendations

The Joint Trades propose several recommendations to improve the Cryptoasset Standard, including:

- Eliminating the distinction between permissioned and permissionless ledgers for Group 1 classification.

- Revising classification condition 2.

- Reconsidering the treatment of regulated stablecoins.

- Recognizing certain cryptoassets as eligible collateral.

- Reassessing the treatment of Group 2 cryptoassets.

- Allowing the use of internal models for market and counterparty risk.

The Impact of DLT in Capital Markets

Alongside the letter, the Joint Trades released a detailed report titled “The Impact of DLT in Capital Markets: Ready for Adoption, Time to Act.” This report underscores the growing significance of the cryptoasset market and highlights the transformative potential of Distributed Ledger Technology (DLT) in capital markets. It argues that the evolution of the market has rendered many of the assumptions underpinning the Basel standard outdated, necessitating a reassessment.

Conclusion

The Joint Trades emphasize the need for a more balanced approach that aligns with actual risk profiles and encourages responsible innovation within the regulatory framework. They believe that a recalibration of the Cryptoasset Exposures Standard is essential to ensure that it accurately reflects the risks and opportunities presented by the evolving cryptoasset market.

Quelques pistes pour l'intégration opérationnelle dans votre dispositif :

- Évaluer l'impact potentiel des recommandations sur votre portefeuille de cryptoactifs.

- Participer activement aux consultations ciblées proposées par le BCBS.

- Mettre à jour vos modèles internes pour refléter les nouvelles recommandations.

- Surveiller les évolutions réglementaires et ajuster vos stratégies en conséquence.

- Collaborer avec des experts pour comprendre les implications des nouvelles normes sur votre entreprise.