Singapore Delays Adoption of Global Standard on Bank Crypto Exposure
By Qing Na and Wang Xiaoqing
The Monetary Authority of Singapore (MAS) has delayed the implementation of a new global standard on banks’ exposure to crypto assets by at least one year, citing concerns that strict rules could curb innovation.
The Lion City’s central bank said Thursday the rules will take effect no earlier than Jan. 1, 2027, in response to public feedback. The Basel Committee on Banking Supervision (BCBS), a global standard setter for the prudential regulation of banks, established the rules for implementation by Jan. 1 next year.
Respondents to the public consultation were concerned that Singapore would be implementing the crypto asset standard ahead of other jurisdictions, which could lead to “regulatory arbitrage,” the MAS said. They recommended that the authority monitor the evolving crypto asset landscape and regulatory developments globally to determine if adjustments to the standard would be necessary.
Banks with or intending to take on crypto asset exposure before the new standard is introduced must work with the MAS to determine the appropriate prudential treatment for their exposures, the central bank said.
The MAS has taken a wait-and-see approach to implementing the Basel standard, given the rapid change in regulation and technology in the crypto asset space, said Andrew Fei, a Hong Kong-based partner at law firm King & Wood Mallesons. This allows the central bank to strike a balance between regulation and innovation by watching how international standards change over the next few years, he told Caixin.
In March, the MAS published a consultation paper, seeking feedback on the BCBS standard.
The standard divides crypto assets into two broad groups. Group one includes tokenized traditional assets and stablecoins with robust stabilization mechanisms.
The other — the riskier category — includes volatile unbacked cryptocurrency such as Bitcoin and ether, as well as tokenized assets or stablecoins that don’t fall into group one. Assets in this category will be subject to a risk weight of up to 1,250%, making them expensive to hold.
Some in the industry have deemed the BCBS’s standard too tough. In August, the Global Financial Markets Association, alongside other industry bodies, criticized the rules as being “excessively conservative” with “overly punitive” capital treatment of crypto assets that don’t accurately represent actual risks and are inconsistent with current risk management practices.
The association called on the BCBS to revise its standard to better reflect actual risk profiles and support innovation.
The sentiment is reflected in the MAS consultation feedback. One of the aspects drawing the most attention was public blockchains, which underpin most mainstream stablecoins and tokenized products.
Respondents said that the standard would categorize crypto assets on these blockchains into the riskier group subject to the “punitive” 1,250% risk weight, which could stifle banking innovation and push crypto asset-related activities outside regulatory perimeters.
Contact reporter Qing Na (qingna@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.
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