The Basel Committee on Banking Supervision has proposed dividing crypto assets into two groups and regulating them based on their market, liquidity, credit and operational risks for banks. Cryptocurrencies like Bitcoin are being subjected to “new conservative regulatory treatment”.
Crypto regulation proposed by the Basel Committee on Banking Supervision
The Basel Committee has proposed regulating crypto assets based on their risks to banks. The Bank for International Settlements (BIS) published the committee’s public consultation on “Prudential Proposals for the Prudential Treatment of Banks Crypto Assets” on Thursday.
The BIS stated that banks’ exposure to cryptocurrencies is currently limited. However, it added:
Continuous growth and innovation in crypto assets and related services, coupled with increased interest from some banks, could heighten concerns and risks of global financial stability for the banking system without certain prudential treatment.
The Basel Committee on Banking Supervision (BCBS) is the most important global standard-setter for the prudential regulation of banks. Its 45 members are made up of central banks and banking regulators from 28 jurisdictions. The committee’s secretariat is located at the BIS in Basel, Switzerland.
The “proposals of the committee distinguish between crypto assets based on the market, liquidity, credit and operational risks that they pose for banks,” the BIS described and stated:
The proposals divide crypto assets into two broad groups: those that are eligible for treatment under the existing Basel framework with some changes; and others, like Bitcoin, are subject to new conservative prudential treatment.
The first group includes “certain tokenized traditional assets and stablecoins,” the BIS clarified, adding that crypto assets in the second group “involve additional and higher risks”.
Proposals for proposals must be submitted by September 10th. However, the BIS noted that the rapidly evolving and complex nature of this asset class is likely to require more than one consultation. The BIS also noted that central bank digital currencies (CBDCs) did not fall within the scope of the consultation.
What do you think of the proposals made by the Basel Committee? Let us know in the comment section below.
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