In June, the committee set out plans to split cryptoassets into two broad groups: those eligible for treatment under the existing Basel Framework with some modifications; and others, such as bitcoin, which will be subject to a new "conservative prudential treatment".

Under the proposals, banks would need to set aside enough capital in reserve to cover any losses on bitcoin holdings in full, equivalent to existing banking capital rules on the most riskiest investments.

In a joint comment letter responding to the committee, the Global Financial Markets Association, Financial Services Forum, the Futures Industry Association, the Institution of International Finance, the International Swaps and Derivatives Association, and the Chamber of Digital Commerce call for a revision of the plans.

The associations argue that proposals would effectively preclude banks from getting involved in cryptoassets by making it economically prohibitive.

This would stifle the benefits that blockchain technology can deliver "across the real economy, to facilitate regulated bank involvement in cryptoasset markets and to provide an appropriately regulated and level playing field across the globe through use of the existing prudential framework," says the GFMA.

The letter argues that the framework for cryptoassets should tap the existing prudential framework for all other bank exposures.

Allison Parent, executive director, GFMA, says: “Our members are in the business of managing risk. New technologies have come before and will come again, but a new risk framework is not required for each one.

"The risks of crypto assets, like other existing assets, can be evaluated and managed by using the existing risk management framework, where they would be classified based on criteria and given an appropriate risk weighting-with conservative treatment applied to risky assets.”

Read the full letter