Crypto asset regulations could be developed with the help of a new survey of stakeholders by the Basel Committee on Bank Supervision, which sets standards for bank regulators around the world.
A potential outcome of the survey is the establishment of minimum crypto asset standards internationally.
The Committee said the size of the crypto asset market is meaningful despite it’s a small part of the global financial system. Crypto is estimated to have reached a market cap of $800 billion in January 2018.
The global advisory center is urging banks to apply a conservative regulatory treatment to crypto assets, particularly for high-risk varieties.
The report said the most volatile crypto assets pose fraud and cyber risks for banks along with liquidity, credit and market concerns money and terrorist financing dangers.
Banks also are said to face liquidity, credit and market risks with highly unstable crypto assets.
The global standards center said banks that do business in crypto assets should at least conduct due diligence and make sure they have the technical expertise necessary to handle the risks.
The study added the anonymity and limited regulatory oversight of many crypto-assets robust clear governance and risk management for the products is critical.
It also called on banks to publicly disclose any material crypto asset exposures or related services as part of its regular financial disclosures and specify the accounting treatment for such exposures, consistent with domestic laws and regulations
In a cautionary note for crypto investors, the study warned in crypto asset markets where small group of players own a significantly large proportion of the virtual currency products, the “whales” could significantly impact the value.
The report went on to say cryptocurrencies do not reliably provide the standard functions of money and can be unsafe to rely on as a medium of exchange or store of value.
The study said several policy questions are raised by growth and constant evolutions of crypto assets including the implications for monetary policy, the smooth operation of payment systems, consumer protection and market integrity, deposit insurance and guarantee schemes, anti-money laundering and the combatting of terrorist financing,
Additional issues that need to be addressed with crypto as the financial products advance include the accounting treatment, financial inclusion, competition, data privacy, taxation, and the broader role of distributed ledger technology.
Among the questions the Committee’s report poses to stakeholders are:
· What features of crypto assets should be considered in the context of developing any potential prudential regulatory definition?
· What are the main economic and related functions and potential sources of value of crypto assets that are relevant in the context of developing a prudential treatment?
· What benefits do crypto assets provide for the banking system, and the provision of financial services?
· Which risks would be the most material with respect to banks’ exposures to crypto assets?
· What are your views on the disclosure requirements related to banks’ crypto assets? Should additional information related to banks’ crypto-asset exposures be disclosed?
Comments are due by March 13.
To see the full report, click on
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