The Basel Committee on Banking Supervision Calls for Disclosure of Crypto Holdings
The Basel Committee on Banking Supervision has introduced a new plan that requires banks to disclose their cryptocurrency holdings. This move comes in response to the collapse of several major crypto firms and the failure of crypto-focused lenders Signature and Silicon Valley Bank. International regulators have attributed these collapses to the surge in popularity of cryptocurrencies, prompting the Basel Committee to take action.
BIS Plan Emphasizes Full Disclosure of Crypto Holdings
The committee, responsible for setting standards in traditional finance, previously acknowledged the need for banks to allocate substantial capital to cover their holdings of unbacked cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). Now, the committee is going further by insisting on full disclosure of these holdings. In an upcoming consultation paper, the Basel Committee will outline comprehensive disclosure requirements related to banks’ crypto asset exposures. These requirements will complement existing capital mandates for digital assets established in December.
Basel Committee Includes Major Global Players
The Basel Committee comprises bank supervisors from 28 global jurisdictions, including major players such as the United States, the United Kingdom, and the European Union. While the committee had previously expressed its commitment to monitoring crypto-related norms and making necessary modifications, the introduction of separate disclosure rules represents a significant step toward enhancing transparency in the crypto space.
Report Identifies Crypto Surge as Cause of Financial Turmoil
In a recently published report, the Basel Committee highlighted the “most significant system-wide banking stress” since the 2008 financial crisis. Cryptocurrencies were identified as a key focal point contributing to this stress. The report also identified two other structural trends indirectly responsible for the financial turmoil: non-bank financial intermediation growth and faster digital payment systems allowing rapid fund withdrawals. Concerns about crypto market instability led to the withdrawal of funds by other customers, further exacerbating the situation.
Hot Take: Basel Committee Implements Disclosure Requirements to Safeguard Financial System
The Basel Committee on Banking Supervision’s decision to require banks to disclose their cryptocurrency holdings is a proactive measure aimed at preventing potential contagion within the financial system. By introducing comprehensive disclosure requirements, the committee aims to enhance transparency in the crypto space and mitigate risks associated with the surge in popularity of cryptocurrencies. This move highlights the committee’s commitment to monitoring crypto-related norms and ensuring the stability of traditional finance. With major global players involved in the committee, these disclosure rules have the potential to set a precedent for other jurisdictions and promote greater accountability in the crypto industry.
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