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The Basel Committee on Banking Supervision (BCBS) recently announced that they are holding a public talk in Hong Kong to discuss the “careful handling policy development for banks regarding crypto assets.” The BCBS is an international body of banking supervisory authorities and central bank governors from around the world.
In an official announcement on June 7, BCBS further explained that it will have to further deliberate on the steps required to establish market developments related to cryptocurrencies and careful handling of banks’ crypto exposure.
Concerns with cryptocurrency
Nonetheless, the committee highlighted that the innovation in such assets and related services, paired with the above-mentioned growing interest of some banks could also increase concerns regarding global financial stability and even risks to the banking system since a “specified prudential treatment has yet to be established.
It was made known that the consultation paper will be published this week adding that it builds to a previous discussion paper and responses they got from “a broad range of stakeholders, and ongoing initiatives underway at other global forums and standard-setting bodies.” During the meeting, experts have also revealed that there were authorities that seek the committee’s approval. It was pointed out, however, that “the committee’s word isn’t law” adding that it only relies on its members to enforce action.
Even though the Banks’ exposure to cryptocurrencies is still in its infancy, but some banks are also interested in these, and without a prudent treatment policy specific to them.
An ‘immature asset class’
In line with this back in March of 2019, the Swiss banking regulator warned the masses about cryptocurrencies as they noted that “such assets do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value. It went on to note that these assets have shown a “high degree of volatility” and even classified as an “immature asset class” given the lack of standardization and constant evolution.
New Covid Policy Of late, the BCBS have wracked their heads around policy discussions on the Covid-19. As the global economic environment is uncertain the banks and regulators need to remain vigilant for further risks and vulnerabilities. In fact, at a US Congressional hearing last month, representatives of three major banks, Citibank, Wells Fargo and Bank of America were paying close attention to cryptocurrencies.