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Basel Committee to revisit crypto asset proposals after market pushback

Basel Committee to revisit crypto asset proposals after market pushback

The Basel Committee on Banking Supervision is to revisit its proposed punitive rules on investments in crypto assets by financial institutions after substantial pushback from trade associations.

In June, the Committee unveiled proposals that would require banks 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 called for a revision of the plans.

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

Given the market resistance to the prosals, the Committee is going back to the drawing board, stating: Members reiterated the importance of developing a conservative risk-based global minimum standard to mitigate prospective risks from cryptoassets to the banking system, consistent with the general principles set out in the consultative document. Accordingly, the Committee will further specify a proposed prudential treatment, with a view to issuing a further consultative document by mid-2022."

Seperately, the Committee also agreed to consult later this month on a set of principles for the effective management and supervision of climate-related financial risks at internationally active banks.

The international standard setter is currently assessing and developing a suite of potential measures - spanning disclosure, supervisory and regulatory measures - to address climate-related financial risks to the global banking system, following the publication of a series of analytical reports earlier this year.

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