‘Basel III’ is a set of international banking regulations developed by the Basel Committee on Banking Supervision. These accords establish minimum capital requirements, leverage ratios, and liquidity standards for banks to enhance their resilience against financial and economic shocks. The framework aims to strengthen the global banking system by reducing banks’ exposure to risk.
Context
Discussions around Basel III’s application to digital assets, particularly stablecoins and crypto-asset holdings by financial institutions, are ongoing. Regulators are examining how to incorporate these digital assets into existing capital and liquidity frameworks to ensure that banks holding or transacting with them maintain adequate safeguards. The implementation of Basel III rules for crypto-assets seeks to prevent contagion and maintain financial stability within the evolving digital economy.
Hong Kong's new draft guidance offers banks a strategic pathway to reduced capital requirements for permissionless digital assets, contingent on robust risk management.
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