Coinbase and Circle, two prominent players in the cryptocurrency industry, are contesting a proposal from the Basel Committee on Banking Supervision that aims to introduce stricter standards for the regulatory treatment of stablecoins held by banks.
The Commission’s consultation paper published in December outlines the requirements for stablecoins to receive preferential regulatory treatment under the “Group 1b category.” These requirements include maintaining low volatility and adequate liquidity. Comments on the proposal are due March 28.
In response, Coinbase expressed disappointment with the commission’s approach in a letter submitted on March 28, criticizing many of its requirements as not based on the actual risk these assets pose to banks. Coinbase argued that the proposed standards appear to reflect broader policy goals rather than strict financial risk considerations.
Coinbase also accused the commission of aiming to significantly limit banks’ ability to hold and utilize stablecoins.
Popular stablecoin issuer Circle also raised concerns about the Commission’s handling of permissionless blockchains. The committee suggested that permissionless blockchains pose unique risks and would not be permitted in Group 1 for the time being.
Circle argued that banks should be encouraged to leverage technologies such as permissionless blockchain to strengthen their digital transformation and cybersecurity efforts. They highlighted their successful partnerships with global financial institutions and advocated a collaborative, rather than stigmatizing, approach to blockchain-based financial services.
The Basel Committee on Banking Supervision, comprised of global standard-setters, plays a key role in shaping the regulatory framework for financial institutions around the world.
Coinbase and Circle are opposing stablecoin regulations proposed by the Basel Committee on Banking Supervision. The proposed regulations aim to determine preferential treatment for stablecoins held by banks. Coinbase criticized the criteria for not being based on real-world risk assessments, while Circle defended the use of permissionless blockchains in banks.
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