The Basel Committee on Banking Supervision is publishing a discussion paper on the design of a prudential treatment for cryptoassets.
The past few years have seen rapid growth in cryptoassets. While the cryptoasset market is still small relative to the size of the global financial system, and banks’ exposures to cryptoassets are currently limited, the absolute size of the market is meaningful and there continue to be rapid developments, with increased attention from a broad range of stakeholders.
As previously indicated, the Committee is of the view that the growth of cryptoassets and related services has the potential to raise financial stability concerns and increase risks faced by banks. Cryptoassets are an immature asset class given the lack of standardization and constant evolution.
Certain cryptoassets have exhibited a high degree of volatility, and present risks for banks, including liquidity, credit, market, operational (including fraud and cyber), money laundering and terrorist financing, and legal and reputation risks. If banks are authorized, and decide, to acquire cryptoassets or provide related services, the Committee is of the view that they should apply a conservative prudential treatment to such exposures, especially for high-risk cryptoassets.
To that end, the Committee is publishing a discussion paper to seek the views of stakeholders on a range of issues related to the prudential regulatory treatment of cryptoassets, including: the features and risk characteristics of cryptoassets that should inform the design of a prudential treatment for banks’ cryptoasset exposures; and general principles and considerations to guide the design of a prudential treatment of banks’ exposures to cryptoassets, including an illustrative example of potential capital and liquidity requirements for exposures to high-risk cryptoassets.
Should the Committee decide to specify a prudential treatment of cryptoassets, it will issue a consultation paper detailing its proposals and seek further input from stakeholders. Any specified treatment would constitute a minimum standard for internationally active banks. Jurisdictions would be free to apply additional and/or more conservative measures if warranted. As such, jurisdictions that currently prohibit their banks from having any exposures to cryptoassets would be deemed compliant with any potential global prudential standard. More generally, this discussion paper should not be interpreted as an endorsement or support by the Committee for any specific existing or planned cryptoasset.
The Committee welcomes comments by 13 March 2020 on the analyzes and ideas set out in this paper from all stakeholders, including academics, banks, central banks, finance ministries, market participants, payment system operators and providers, supervisory authorities, technology companies and the general public.