• Deborah

On June 10, 2021, the Basel Committee on Banking Supervision (BCBS) issued a public consultation on a proposal that would apply regulatory capital requirements for banks’ exposures to cryptoassets which rapid growth are considered by the BCBS to have the potential to raise financial stability concerns.

The prudential treatment of cryptoassets have been drafted with respect to the following principles:

  • Same risk, same activity, same treatment: Cryptoasset that poses the same risks compared with a “traditional asset” should be subject to the same capital, liquidity and other requirements, by applying first and foremost the concept of “technology neutrality”.

  • Simplicity: A simple and cautious treatment that may be revisited in the future depending on the evolution of cryptoassets.

  • Minimum standards: Any Committee-specified prudential treatment of cryptoassets would constitute a minimum standard for internationally active banks. Jurisdictions would have the option to apply additional and/or more stringent measures.

The consultation paper outlines:

  • The general approach for determining minimum risk-based capital requirements, where cryptoassets are screened and classified into two categories -i.e. Group 1 cryptoassets and Group 2 cryptoassets.

  • The capital requirements for Group 1 cryptoassets.

  • The minimum risk-based capital requirements for Group 2 cryptoassets. Group 2 cryptoassets being those assets that do not meet any of the classification conditions.

  • Other regulatory requirements (ie leverage ratio, large exposures, liquidity ratios) for all cryptoassets.

  • The responsibilities of banks and supervisors for the supervisory review.

  • The disclosure requirements for all cryptoassets.

The consultation is due to close on 10 September 2021, and further consultations are expected to follow.

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