Global Regulator Basel Committee Calls For New Crypto Rules

The international and global regulator Basel Committee on Banking Supervision (BCBS) recently called for a more conservative prudential treatment framework for cryptocurrency assets. This committee, which includes banking regulators from the United States, Europe and Japan recently published a report on the prudential treatment of crypto assets.

As the study shows, the analysis was first carried out in November when the cryptonews showed that new rules and regulations could be coming. In the document, the global regulator Basel Committee claims that the growth of cryptocurrencies and related services will negatively affect financial stability and increase the risks faced by banks.

“Crypto-assets are an immature asset class given the lack of standardisation and constant evolution. Certain crypto-assets have exhibited a high degree of volatility, and present risks for banks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks,” the report reads.

Furthermore, the global regulator Basel Committee (BCBS) also expressed the idea that if authorized, banks that decide to acquire crypto assets or provide related services should use prudence, especially when it comes to high-risk tokens.

The document also specifies that the recent exposure to cryptocurrency can be direct whenever the bank holds the assets – or indirect when it owns crypto derivatives, for example. The global regulator Basel Committee also recommended that cryptocurrency should not be accepted as credit risk mitigation collateral. According to the regulator, the crypto assets held in the trading book should be subject to a full deduction for market risk as well as credit valuation.

“This treatment reflects the high degree of uncertainty about the positive realisable value of crypto-assets in times of stress,” the paper also reads.

In the paper, we can also see that the global regulator Basel Committee said that central bank digital currencies are outside its scope and that stablecoins now “warrant further assessment and elaboration before specifying a prudential treatment.”

For a long time, the Basel Committee has shown that it is wary of crypto assets. As a committee of banking supervisory authorities established by the governors of the Group of Ten countries in year 1974, it is certainly an influential international body.