The Basel Committee on Banking Supervision met last Friday and discussed cryptocurrencies, among other topics. The committee stated that it will soon publish its second consultation document with the intention of finalizing guidelines on the prudential treatment of cryptocurrency exposure by banks by the end of the year.
In a press release published Tuesday, the committee issued the following statement, likely in reference to the recent collapse of the Terra ecosystem:
“Recent events have further highlighted the importance of having a global minimum prudential framework in place to mitigate the risks of crypto assets.”
The committee launched consultations on the banking sector’s exposure to cryptocurrency risk in 2021 and published a document on its findings at that time. The committee divided crypto assets into two groups: tokenized traditional assets and stablecoins made up one group, and everyone else made up the second. A risk weight of 1,250% was assigned to the second group, which included all cryptocurrencies and their derivatives. That meant a bank had to hold $1 in common money for every dollar in cryptocurrency it held.
The committee’s “conservative prudential treatment” drew objections from banking industry groups. The International Swaps and Derivatives Association (ISDA), the Futures Industry Association (FIA), the Institute of International Finance, the Digital Chamber of Commerce and five other organizations said in a letter to the committee that the proposed requirements amounted to ” Material Impediments to Regulated Bank Participation in Crypto Asset Markets.”
The Basel Committee on Banking Supervision is made up of central banks and regulators from 28 countries and jurisdictions, as well as three observer countries and five agencies. It has the support of the Bank for International Settlements, but its decisions do not have the force of law.
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