cryptovibes.com
Several industry associations have pushed back against a second Basel Committee on Banking Supervision consultation on the rules and regulations on investments in crypto assets by financial institutions, calling for a series of changes.
In November, in the wake of industry opposition, the Basel committee agreed to revisit its proposed punitive rules that would need banks to set aside adequate capital in reserve to cover all losses on bitcoin holdings, equivalent to the current banking capital rules on the riskiest investments.
Nonetheless, with a second consultation now out, a group of eight trade associations – including the Futures Industry Association, the Global Financial Markets Association, and the International Swaps and Derivatives Association – have once more raised objections.
Some parts of the second consultation:
“would meaningfully reduce banks’ ability to—and in some cases effectively preclude banks from—utilizing the benefits of distributed ledger technology (“DLT”) to perform certain traditional banking, financial intermediation, and other financial functions more efficiently.”
“As a result, banks would be limited in their ability to respond to their customers’ demand for access to crypto asset products and services. That outcome is not in the best interests of customers, investors, or the financial system more broadly. Indeed, the role of banks in the financial system and the scope of the financial sector within the purview of prudential regulators could be affected.”
Among the parts of the consultation that the group opposes is what is known as the “prohibitive” exposure limit to Group 2 cryptocurrency assets to 1% of a bank’s Tier 1 capital which is calculated on a “double-gross” basis by accumulating the long and short positions without any hedging recognition.
Instead, the associations support an exposure limit that is calculated on a net basis, calibrated to 5% of Tier 1 capital, and accompanied by disclosure to supervisors of gross positions.
Furthermore, the associations object to the addition of an infrastructure risk add-on for all the Group 1 crypto asset exposures, insisting that it is not necessary and aims to resolve risks that are already managed by the current prudential infrastructure.