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Basel Committee Seeking Global Crypto Standard

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Anatol Antonovici | Dec 13, 2019 | 11:00

Basel to establish global crypto standard News

Basel Committee Seeking Global Crypto Standard

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Anatol Antonovici | Dec 13, 2019 | 11:00


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The Basel Committee on Banking Supervision (BCBS) published on Thursday a discussion paper on the treatment of crypto and digital assets.


Central Banks Expected to Share their View on Crypto

The BCBS, an international body that has central banks as stakeholders, wants a global standard to approach cryptocurrencies and blockchain-based assets. The committee published a paper and expects the reaction of central banks by March 2020.

The BCBS admitted that the size of the crypto market is meaningful to be monitored by central banks. However, the committee, which is related to the Bank for International Settlements (BIS), said that the market was still small in comparison to the global financial system.

The expansion of the crypto market might lead to increased risks for central banks around the world. The emerging cryptocurrency space raises concerns about financial stability. The BCBS cited issues like high volatility of crypto-assets, fraud, money laundering, and terrorist financing, among others.

Nevertheless, if commercial banks are authorized to buy cryptocurrencies and provide related service, they should implement a “conservative prudential treatment of such exposures,” the Based-based committee says.

Last month, we reported that Germany’s federal parliament passed a draft bill that allows local banks to sell cryptocurrencies like Bitcoin and offer custody services.

BCBS Doesn’t Refer to Digital Currencies Issued by Central Banks

While the BCBS is asking stakeholders to share their views on how to treat crypto assets, the committee said that its discussion paper didn’t touch upon central bank-issued digital currencies (CBDC).

The international body revealed that it was working on a separate initiative related to CBDCs.

The BCBS proposes a list of recommendations for commercial and investment banks that are directly or indirectly exposed to crypto-assets. For example, cryptocurrencies shouldn’t be eligible to apply as “financial collateral for the purpose of the credit risk mitigation framework.” Besides, crypto assets should not be regarded as “high-quality liquid assets (HQLA) for the purpose of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).”

The BCBS said that jurisdictions could add additional, tighter rules at their will. Thus, jurisdictions that prohibit their banks from conducting crypto operations would be deemed compliant with the BCBS’ global prudential standard.

What do you think about the BCBS’ initiative? Share your thoughts in the comments section!


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