Stablecoin Surge Compels Basel to Address Regulatory Inflexibility
- Global regulators, led by the Basel Committee, face pressure to revise strict 1,250% capital requirements for stablecoins as their role in institutional finance expands. - The U.S. Fed, Bank of England, and EU reject current rules, citing impracticality, while stablecoins like USDT/USDC now underpin regulated crypto derivatives and yield products. - Basel chair Erik Thedéen acknowledges the need for a "different approach" to risk-weighting stablecoins, which now enable institutional access to crypto mark
Global banking regulators are reconsidering their tough capital rules for digital currencies as the stablecoin sector experiences rapid growth, with the Basel Committee under increasing pressure to adjust regulations that have largely kept banks out of the crypto space. The committee's existing policy, which
The Basel Committee's uncompromising stance has met with open opposition from leading economies. Both the U.S. Federal Reserve and the Bank of England have indicated they will not adopt the rules as they stand, with Federal Reserve representatives describing the capital requirements as "impractical" and "not grounded in reality"
The swift rise of stablecoins has challenged previous beliefs about their risks. Erik Thedéen, who chairs the Basel Committee, admitted in an interview with the Financial Times that the growth of stablecoins has been "quite significant,"
European regulators are also confronting the challenges posed by these developments.
The Basel Committee's 2022 guidelines, scheduled to be enforced in January 2026, are already being reconsidered. Thedéen stressed the importance of "rapid evaluation" to determine whether stablecoins—and, by extension, permissionless blockchains—should continue to carry the 1,250% risk weight or be reclassified. The decision will shape whether banks can join the next wave of crypto innovation, balancing progress with financial stability. For now, the gap between regulatory caution and the pace of market development remains wide, with the U.S. and UK
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