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

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

In recent months, regulatory authorities have expressed their position regarding various crypto assets. For instance, just this month, the CFTC declared that ETH, BTC and 80% of cryptocurrencies are not securities, although SEC considers the opposite.

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

Another such development is the new ruling by the Basel committee, one giving permissioned stablecoins

preferential treatment in the amended cryptocurrency asset standards.

Basel Committee’s amended Crypto Standards

The Basel Committee, the agency that deals with setting standards for bank regulations, has released the amended version of its crypto assets standards. Based on the Committee’s conclusion, permissioned stablecoins such as JPM Coin will receive classification under Group 1b.

The classification regarding Group 1b states that,

“subject to capital requirements based on the risk weights of underlying exposures as set out in the existing Basel Framework.”

However, other stablecoins such as Tether’s USDT and USDC are now classified under Group 2. They are thus subject to conservative capital treatment, which limits the exposure traditional financial institutions such as banks can have to them.

Simply put, the classification implies banks will have strict restrictions on their exposure to these assets.

Crypto community’s reaction

In light of the recent ruling and classification, the Basel Committee has received massive backlash from the crypto community. Various stakeholders have argued that the BIS is trying to kill tokenized cash markets while helping traditional banks.

Founder of Zero Knowledge, Austin Campbell is one of them. On his X page, he criticized the move, stating,

“The fact that @BIS_org is trying to rig the tokenized cash market for banks should be unsurprising, given that the literal first word B in BIS stands for is Bank. I said on @intangiblecoins podcast that private bank chains are a bridge to nowhere, and this sort of thing proves that I am correct – trying to win by rigging the game is what you expect when you cannot win by competing fairly.”

A wave of crypto regulations

In recent months, crypto regulations across the globe have become a norm. For starters, the European Union introduced MICA, a list of regulations that considerably impacted Tether’s USDT.

Additionally, as reported by AMBCrypto, Russia is now pushing a new mining bill that will affect individuals in crypto mining while allowing state control over Cryptocurrency markets.

On the other side of the world, Argentina and South Korea have proposed new crypto regulations too. In fact, Argentina’s regulations

will have a massive impact on stablecoins as the country moves to dollarize the economy.

Impact on stablecoins

The recent ruling will have a major impact on stablecoins markets. Reduced institutional investments in stablecoins such as USDT might change the market landscape. As noted by Amit Jaswal on X,

“Interesting move by the Basel Committee! Giving permissioned stablecoins preferential treatment could shift the crypto landscape.”

The move will disadvantage the stablecoins, thus jeopardizing the stablecoin markets with reduced inflows and institutional interests.