### The Bank of International Settlements published rules for Central Banks Around the World with regard to crypto. It appears that crypto adoption is indeed inevitable and the so-called ‘bank of banks’, the Bank of International Settlements (BIS) is getting ready for a future wherein Central Banks Around the world hold Crypto.

In a bear market, like the present one, it’s easy to think that crypto adoption is slowing down and that perhaps the exponential adoption we all expected isn’t coming true. 

But, it wasn’t so long ago that Bitcoin and Crypto were just regarded as a joke. Now, incredibly, there is a framework in place for Central Banks and crypto exposure. When an institution as serious as the Bank of International Settlements begins preparation for a future that includes crypto or digital assets in the custody of Central Banks, it’s hard to find a stronger sign that the growth of crypto usage is real and unstoppable. 

On December 2022, the BIS published a document entitled “Prudential Treatment of Cryptoasset Exposures.” It is a 36 page document detailing how Central Banks should treat cryptoassets, and is meant to be the framework/standard for all Central Banks starting January 1, 2025. 

The full text can be viewed [here](https://www.bis.org/bcbs/publ/d545.pdf). 

The standard divides crypto into two groups (with sub-groupings): 

Group 1a includes tokenized traditional assets (like bonds and treasury bills)and Group 1b includes ‘cryptoassets with effective stabilization mechanisms’ otherwise known as stablecoins. 

Group 2 cryptoassets include all other cryptoassets that aren’t included in Group 1, which is pretty much Bitcoin and the cryptocurrencies that retail investors love to trade. The standard also states that “A bank’s total exposure to Group 2 cryptoassets must not exceed 2% of the bank’s Tier 1 capital and should generally be lower than 1%.” 

So the question is, how would this affect crypto? We see two things. First, we believe that the rule is paving the way for the utilization of blockchain technology, particularly for Decentralized Finance. It appears that the BIS foresees and welcomes a future wherein assets are tokenized. 

If assets are tokenized, they can then be traded on permissionless blockchains. Thus, permissionless blockchains protocols could gain much wider usage. A wide adoption of tokenized assets will benefit early investors in the protocols that are used. 

Investors of the tokenized assets will also benefit from the advantages of crypto and DeFi: lower transactions fees, 24/7 trading, portability of tokens, etc. 

The second thing we see is that the BIS seems fearful of the volatility inherent in Bitcoin and other crypto and wants to prevent a sudden, risky investment into crypto by central banks. A limit of 2% has been set. This limit appears bullish because the total market capitalization of crypto is a drop in the bucket compared to 2% of the assets of the world’s central banks. 

If Central Banks acquire crypto worth 2% of their assets across the globe, this would be very, very bullish for crypto.

The Bank of International Settlements published rules for Central Banks Around the World with regard to crypto. It appears that crypto adoption is indeed inevitable and the so-called ‘bank of banks’, the Bank of International Settlements (BIS) is getting ready for a future wherein Central Banks Around the world hold Crypto.

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