BIS Regulatory Guidance Threatens USDT and USDC, Favors Permissioned Stablecoins Like JPMCoin

• The recently announced guidance from the Bank of International Settlements (BIS) has stirred discussions within the cryptocurrency community.
• This new guidance sets stringent criteria for stablecoins, particularly affecting those issued on permissionless blockchains like Tether’s USDT and Circle’s USDC.
• The Basel Committee on Banking Supervision’s report highlights a major regulatory shift that could reshape the stablecoin landscape.

Explore the latest BIS guidance on stablecoins and its potential impact on major assets like USDT and USDC.

BIS Tightens Regulations for Stablecoins

The Bank for International Settlements (BIS) has recently updated its regulatory framework, focusing particularly on stablecoins issued on permissionless blockchains. According to the final disclosure report by the Basel Committee on Banking Supervision, banks will now have to provide detailed qualitative and quantitative disclosures about their crypto-related activities and maintain sufficient liquidity to ensure stability. This move is aimed at bolstering the financial system’s resilience, especially concerning the widespread use of some crypto-assets.

BIS’s Preferential Treatment for Permissioned Stablecoins

The BIS has introduced new criteria for stablecoins that favor permissioned over permissionless options. Specifically, stablecoins that meet certain rigorous standards will receive preferential regulatory treatment under the “Group 1b” classification. This classification is scheduled to be implemented by January 1, 2026. By setting this standard, BIS aims to provide a clearer regulatory pathway for stablecoins, aligning them more closely with traditional financial norms and reducing systemic risks.

Impact on Major Stablecoins like USDT and USDC

Stablecoins such as Tether’s USDT and Circle’s USDC are anticipated to face significant regulatory challenges due to these new standards. The BIS’s stance means that stablecoins issued on permissionless blockchains will undergo more stringent scrutiny and could see restrictions imposed on their operation. This guidance arrives concurrently with the Hong Kong Monetary Authority’s new consultation papers, which propose a licensing regime for stablecoin issuers. Collectively, these developments signal a tightening regulatory climate for crypto-assets.

Industry Reactions and Future Outlook

Reactions from the crypto industry have been swift and critical. Caitlin Long, CEO of Custodian Bank, voiced her concerns via social media, criticizing the BIS’s approach and suggesting that the United States may likely ignore these new guidelines. Contrarily, BlackRock’s Head of Digital Assets recently underscored that public blockchains hold an edge over private ones, hinting at a possible divergence in industry versus regulatory perspectives.

Moreover, banks are encouraged to adopt permissioned stablecoins, such as JPMorgan’s JPMCoin, under the new BIS guidance. Notably, State Street’s rumored plans to launch a stablecoin further reflect the trend towards permissioned blockchain solutions. This pivot could limit the growth and integration of widely-used permissionless stablecoins like USDT and USDC.

Conclusion

The newly issued BIS guidelines undoubtedly mark a turning point for stablecoin regulation. By tightening criteria and favoring permissioned stablecoins, the BIS aims to mitigate risks associated with these digital assets. For investors and stakeholders in the crypto space, these changes underscore the need for adaptability and heightened awareness of regulatory shifts. Moving forward, the industry must closely monitor how these regulations evolve and prepare for a potentially more restricted operational environment for certain stablecoins.