The Basel Committee on Banking Supervision Proposes Mandatory Disclosure of Crypto Exposure
The Basel Committee on Banking Supervision, which includes central banks and financial authorities from 28 jurisdictions, has released a consultation paper suggesting that banks should be obligated to disclose their exposure to cryptocurrencies. This proposal is based on the disclosure guidelines outlined in the final prudential standard on crypto asset exposure, issued in December 2022.
The objective of the consultation paper is to establish a standardized “disclosure table and set of templates for banks’ crypto-asset exposures.” The proposed implementation date for these regulations is January 1, 2025. The committee is seeking public input on the proposal until January 31, 2024.
Quantitative and Qualitative Data
If the regulations are implemented, banks will be required to provide quantitative data on their exposures to crypto assets, including information on capital and liquidity requirements. Additionally, they will need to offer qualitative data on their activities related to cryptocurrencies.
Banks will also be expected to disclose the accounting classifications of their crypto asset exposure and liabilities. The committee believes that employing a uniform disclosure format will promote market discipline and reduce information asymmetry between banks and market participants.
Prior Engagement with Crypto
In June, the Basel Committee briefly discussed crypto assets and bank exposure, primarily focusing on permissionless blockchains and the eligibility criteria for “Group 1” stablecoins. The Bank for International Settlements (BIS), which hosts the committee, has been actively involved in consultations regarding cryptocurrencies and exploring regulatory aspects of decentralized technology.
Recently, the BIS collaborated with several European central banks to propose a system for tracking international cryptocurrency flows.
Hot Take: Basel Committee Pushes for Greater Transparency in Crypto Exposure
The Basel Committee on Banking Supervision’s proposal to mandate the disclosure of banks’ exposure to cryptocurrencies demonstrates a commitment to increasing transparency in the crypto industry. By providing standardized guidelines for disclosure, the committee aims to foster market discipline and reduce information asymmetry. This move aligns with broader efforts by global regulatory bodies to better understand and regulate the growing influence of cryptocurrencies. If implemented, these regulations would require banks to provide detailed quantitative and qualitative data about their crypto asset exposure, providing stakeholders with valuable insights into the industry’s risks and opportunities.
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