The Basel Committee on Banking Supervision has issued a public consultation to determine the prudential and regulatory framework to which banks will have to adhere with respect to the treatment of exposures to cryptocurrencies, as reported in a statement this Thursday.
The agency has indicated that current exposures of banks to these assets are “limited”, but that the growth and innovation of cryptocurrencies and other associated services, as well as the interest expressed by some financial institutions, could raise concerns about the global financial stability and risks to the banking system. To avoid this, the Committee considers it necessary to create a specific prudential treatment.
Among the risks contemplated by Basel are credit, liquidity, market and operational risks, as well as the possibility of fraud, terrorist financing or money laundering. Although the body will receive proposals until September 2021, it has established an initial framework that divides crypto assets into two categories. On the one hand, all those traditional assets tokenized and known as stablecoins. These crypto assets could be eligible for inclusion under the current Basel prudential framework with minimal modifications.
Instead, the more well-known and volatile cryptocurrencies, such as bitcoin, will be included in a second group because they have “more and greater risks”. The Committee has proposed that they be subject to a “new conservative prudential treatment”. In this way, any crypto asset in this group that is held in the portfolio will receive a risk weight of 1,250%, the highest contemplated in Basel. This means that for every 100 euros that a bank has in bitcoin or similar cryptocurrencies, it will have a capital requirement of 100 euros. This new prudential framework will not apply in any case to digital currencies issued by central banks, so that type of cryptocurrency is out of the question.