The global banking regulators have taken a
significant step towards increasing transparency in the financial sector. The
Basel Committee, comprising banking regulators from major global financial
hubs, has introduced a proposal to enforce standardized disclosure of crypto
assets by major banks starting in January 2025.
This move aims to bolster “market
discipline” by offering investors a comprehensive view of banks’ crypto
holdings and activities. The Basel Committee, one of the Bank for International
Settlements (BIS) committees, took this step after establishing new rules in
December last year that dictate the amount of capital banks must maintain to
cover various categories of crypto assets.
According to a statement on BIS’ website, the Basel
Committee released a new framework for public consultation, outlining how banks
should report their crypto asset holdings to the public.
According to the proposal, banks must provide
qualitative and quantitative information regarding their dealings with crypto
assets. This information will encompass details on their exposure to crypto
assets, the corresponding capital and liquidity requirements, and their
activities related to these digital assets.
The Basel Committee stated: “Banks would also
be required to provide details of the accounting classifications of their
exposures to crypto assets and crypto liabilities. The Committee expects that a
common format for disclosures will support the exercise of market discipline
and help to reduce information asymmetry between banks and market
participants.”
A new Basel Committee consultative document proposes a standardised disclosure table and set of templates for banks’ cryptoasset exposures: comments welcome by 31 January 2024 https://t.co/SzMwXNxuQF pic.twitter.com/0e7lXWspab
— Bank for International Settlements (@BIS_org) October 17, 2023
Shifting Stance on Digital Assets?
These proposed measures are set to play an important
role in ensuring that banks adhere to the regulations in the rapidly growing
digital asset industry. The efforts of the Basel Committee are a shift from its
previous stance on digital assets.
In July, the BIS submitted a report to the Group of
Twenty (G20) and the European Union, advocating against adopting cryptocurrencies as a monetary instrument. It cited “inherent structural
flaws” and emphasized the instability and inefficiency in the stablecoin
sector.
The BIS expressed its view that cryptocurrencies
have thus far failed to utilize innovation for the betterment of society,
casting doubt on their role in the future of finance. It highlighted their
instability, inefficiency, lack of accountability, and the absence of a
meaningful contribution to real economic activity.
However, the report did acknowledge that
cryptocurrencies possess elements of innovation, such as programmability and
the ability to automate transactions and integrate with other systems. These
features, in conjunction with asset tokenization, have the potential to reduce
transaction costs significantly.
The global banking regulators have taken a
significant step towards increasing transparency in the financial sector. The
Basel Committee, comprising banking regulators from major global financial
hubs, has introduced a proposal to enforce standardized disclosure of crypto
assets by major banks starting in January 2025.
This move aims to bolster “market
discipline” by offering investors a comprehensive view of banks’ crypto
holdings and activities. The Basel Committee, one of the Bank for International
Settlements (BIS) committees, took this step after establishing new rules in
December last year that dictate the amount of capital banks must maintain to
cover various categories of crypto assets.
According to a statement on BIS’ website, the Basel
Committee released a new framework for public consultation, outlining how banks
should report their crypto asset holdings to the public.
According to the proposal, banks must provide
qualitative and quantitative information regarding their dealings with crypto
assets. This information will encompass details on their exposure to crypto
assets, the corresponding capital and liquidity requirements, and their
activities related to these digital assets.
The Basel Committee stated: “Banks would also
be required to provide details of the accounting classifications of their
exposures to crypto assets and crypto liabilities. The Committee expects that a
common format for disclosures will support the exercise of market discipline
and help to reduce information asymmetry between banks and market
participants.”
A new Basel Committee consultative document proposes a standardised disclosure table and set of templates for banks’ cryptoasset exposures: comments welcome by 31 January 2024 https://t.co/SzMwXNxuQF pic.twitter.com/0e7lXWspab
— Bank for International Settlements (@BIS_org) October 17, 2023
Shifting Stance on Digital Assets?
These proposed measures are set to play an important
role in ensuring that banks adhere to the regulations in the rapidly growing
digital asset industry. The efforts of the Basel Committee are a shift from its
previous stance on digital assets.
In July, the BIS submitted a report to the Group of
Twenty (G20) and the European Union, advocating against adopting cryptocurrencies as a monetary instrument. It cited “inherent structural
flaws” and emphasized the instability and inefficiency in the stablecoin
sector.
The BIS expressed its view that cryptocurrencies
have thus far failed to utilize innovation for the betterment of society,
casting doubt on their role in the future of finance. It highlighted their
instability, inefficiency, lack of accountability, and the absence of a
meaningful contribution to real economic activity.
However, the report did acknowledge that
cryptocurrencies possess elements of innovation, such as programmability and
the ability to automate transactions and integrate with other systems. These
features, in conjunction with asset tokenization, have the potential to reduce
transaction costs significantly.
