Coinbase and Circle Contest Stablecoin Requirements Proposed by the Basel Committee
Crypto firms Coinbase and Circle have raised objections to certain aspects of a proposal by the Basel Committee on Banking Supervision, which aims to introduce stricter criteria for the preferential regulatory treatment of banks’ exposure to stablecoins.
The committee published a consultation in December, proposing that banks conduct due diligence to ensure they understand the stabilisation mechanisms of stablecoins to which they are exposed. Proposed requirements determine whether stablecoins will be eligible for a “Group 1b category,” which grants preferential regulatory treatment. Comments on the consultation were due by March 28.
Coinbase expressed disappointment with the committee’s approach in a comment letter submitted on March 28. The exchange criticized many of the proposed requirements, stating that they are not based on the risk of these assets to a bank but reflect other policy objectives that the committee typically does not incorporate in capital requirements. Coinbase further highlighted that the committee’s choices demonstrate a desire to severely limit the holding and use of stablecoins by banks.
Circle, the issuer of the stablecoin, also raised concerns about the committee’s treatment of permissionless blockchains. In its comment letter submitted on March 27, Circle argued that there is a strong case for banks to leverage blockchain technology and open-source technologies to advance their digital transformation and cybersecurity efforts. Circle emphasized its successful operating experience and partnerships with global banking institutions, suggesting a collaborative model that banks can benefit from.
The Basel Committee on Banking Supervision is a global standard setter, with members including countries such as the U.S., Canada, and Japan.