Basel Committee Proposes Cryptocurrency Disclosure Requirements for Banks
Date: 2023-10-07 Author: Dima Zakharov Categories: BLOCKCHAIN, IN WORLD
The Basel Committee on Banking Supervision, responsible for setting standards for traditional financial lenders, has announced its intention to implement disclosure requirements for banks involved in cryptocurrency transactions. This decision follows a thorough examination of the causes behind the bankruptcies of institutions like Silicon Valley Bank, Signature Bank of New York, and First Republic Bank.
The Basel Committee identified structural factors that contributed to the downfall of these banks, including the growing prominence of non-bank intermediaries, the concentration of crypto assets in a few institutions, and the rapid flow of customer funds due to increasing digitalization.
The new rules proposed by the banking regulatory committee stem from international regulators' belief that the banking turmoil this year partially resulted from the sudden cryptocurrency frenzy.
Banks to Disclose Cryptocurrency Assets to Regulators
As a result, banks will now be required to disclose the size and nature of their unsecured cryptocurrency assets, such as Bitcoin and Ethereum. The committee emphasized that the banking disturbances in March 2023 represented the most significant systemic banking stress since the Great Financial Crisis in terms of scale and scope.
The committee has indicated that a consultative document outlining a set of disclosure requirements related to banking crypto asset risks will be published soon.
The Basel Committee, consisting of banking authorities from 28 global jurisdictions, including the United States, the United Kingdom, and the European Union, had previously hinted at monitoring cryptocurrency-related standards and making necessary adjustments.
It's worth noting that in the United States, there have been calls to tighten requirements for cryptocurrency companies as well. For instance, banks like JPMorgan and other firms with cryptocurrency exposure will need to disclose their assets.
Basel Committee Aims to Minimize Risks in the Market
The committee's position is understandable, given that a trial against the former head of FTX exchange is currently underway. Committee representatives are keen on ensuring the stability of the financial system. However, placing the sole blame on cryptocurrencies for the decline of banks is shortsighted. The banking industry has been grappling with age-old problems that have remained unresolved for decades, and digital assets are not the sole culprits in this situation.
