Banks have Given Themselves Permission to Use Tokenized Assets

On December 16, the Basel Committee approved the consensus framework for the prudential treatment of cryptoassets. The document allows banks to hold up to 2% of their reserves in cryptocurrencies, such as Bitcoin or Ethereum, and establishes that for tokenized assets the rules already in place for underlying assets will apply. The new rules will start to apply from 2025, and represent a further step towards a tokenized economy. 

According to the Governor of the Bank of Spain and Chairman of the Basel Committee, Pablo Hernández de Cos, the new rules provide "a prudent global regulatory framework for internationally active banks' exposures to cryptoassets that promote responsible innovation while preserving financial stability." 

The Basel Committee is an international organization whose mission is to regulate the financial stability of banks, particularly their solvency. It was within this organization that the new bank solvency standards were developed in the wake of the Great Recession of 2008. The standard for prudential treatment refers to the prevention of financial instability (and ultimately an economic crisis) due to irresponsible asset management, and the new text refers to tokenized assets, stablecoins and unbacked cryptocurrencies, such as BTC.

Tokenization consists of the digital representation of assets using blockchain technology, the properties of which represent, in practice, a substantial improvement on the current financial infrastructure. Its scope is such that both the financial sector itself and national administrations and multiple international institutions are seeking its implementation. At the same time, until now, the lack of specific regulation has generated uncertainty.

The Basel Committee's announcement is joined by the recent approval of the European Union's Pilot Scheme, two important milestones for the mass adoption of tokenized assets.