The Basel Committee on Banking Supervision says growth in crypto could pose risks to lenders.
Swiss-based global banking regulator, the Basel Committee on Banking Supervision, is considering the introduction of crypto capital rules, the watchdog announced in a statement released on Monday.
The committee is set to “publish a consultation paper” that will incorporate the views of its stakeholders about the “prudential treatment of banks’ exposures to crypto assets.”
Per the statement, the regulatory body is seeking consensus on the issue of how banks and other lenders can protect themselves against any potential risks from crypto-assets.
The regulator notes in its statement that most banks have limited exposure to crypto-assets. However, the cryptocurrency space is seeing massive innovation and growth, with some banks showing “heightened interest.”
Cryptocurrencies have witnessed tremendous growth in the last few years, with trailblazing Bitcoin jumping to highs near $65k. Although prices have declined in recent weeks following negative news from China, institutional interest continues to grow.
According to the committee, these developments increase concerns around global financial stability. This might increase the risks posed to the entire banking system if there is no specified prudential treatment in place.
Prudential rules define the minimum capital requirements and other business restrictions that banks have to adhere to limit how much risk a lender can undertake. If the committee enforces prudential rules, any bank dealing with crypto services will adhere to strict guidelines on risk assessment.
The BCSC has said a consultation paper on the topic will be ready this week.
Last week, British banking giant Standard Chartered announced it would be launching a crypto exchange for UK and European clients. While Standard Chartered joins the likes of Goldman Sachs in offering crypto services, European banking giant HSBC says it has no such plans largely because crypto is still too volatile.
Bitcoin price has dropped to lows of $32,885 as of writing, shedding about 9% of its value in 24 hours amid fresh selling pressure.