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Central banks consult on crypto-asset oversight

Central banks consult on crypto-asset oversight

The Basel Committee on Banking Supervision is calling for feedback on the prudential regulatory treatment of crypto-assets.

While the crypto asset market remains small relative to that of the global financial system, and banks currently have very limited direct exposures, the Committee of central banks believes that the continued growth of crypto asset trading platforms and new financial products has the potential to "raise financial stability concerns and increase risks faced by banks".

Earlier this year, it reeled off a long list of risks facing financial institutions dabbling in crypto assets, 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.

With this in mind, it told banks that if they decide to acquire crypto-assets or provide related services they should apply a "conservative prudential treatment to such exposures".

Now, the Committee has published a discussion paper on the issue and is asking for feedback - before 13 March - from stakeholders, including on:

  • the features and risk characteristics of crypto-assets that should inform the design of a prudential treatment for banks' exposures
  • general principles and considerations to guide the design of a prudential treatment of banks' exposures to crypto-assets, including an illustrative example of potential capital and liquidity requirements for exposures

The Committee will then decide on whether to specify a prudential treatment of crypto-assets, issuing a consultation paper detailing its proposals and seeking further input from stakeholders.

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