Global Banking Regulator Wants Tough Rules for Crypto

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Global Banking Regulator Wants Tough Rules for Crypto
Credit: © Reuters.

By Aditya Raghunath -- The world’s top international banking authority wants tougher rules around cryptocurrencies. The Basel Committee on Banking Supervision (BCBS) said it is in the process of launching a public consultation on proposals to figure how banks around the word can manage exposure to cryptoassets.

“While banks' exposures to cryptoassets are currently limited, the continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment,” according to the consultative document issued on Thursday.

The BCBS sets rules for banking regulations and believes that crypto-assets could pose a risk to banks. While crypto-assets are currently small, they are rapidly growing and the market’s absolute size is meaningful.

“Cryptoassets are defined as private digital assets that depend primarily on cryptography and distributed ledger or similar technology,” said the document.

BCBS wants to divide cryptoassets into two types. The first one is an asset that is backed by a currency. For example: If the Reserve Bank of India (RBI) were to launch its own digital currency.

The second one is a cryptocurrency with a speculative nature, like Bitcoin . “Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment,” the BCBS said.

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