The Basel Committee on Banking Supervision has announced plans to implement disclosure requirements for banks related to their cryptocurrency asset exposures and risks.
The move comes after the collapse of the major banks, which, international regulators believe, was triggered by the hype around crypto assets.
In a recently released consultation paper, the influential global banking regulation committee proposed rules, forcing the lenders to reveal the size and nature of their unbacked crypto holdings and activities. This is intended to complement existing capital requirements and guidelines agreed upon in December 2021.
The agreement, however, was geared towards preventing banks from potentially holding prohibitive levels of protective capital against crypto assets.
The Basel Committee, which was comprised of banking authorities from 28 jurisdictions worldwide, had previously signaled it would continue monitoring the crypto space and amending policies on the go. However, this consultation marks the first concrete proposal to mandate separate crypto disclosure norms for lenders.
The report singled out Signature Bank as an example of deficiencies in crypto risk management. Last year, many major crypto platforms like FTX, Terra-Luna, and others were wiped out from the market, resulting in millions of dollars in loss for investors.
The report further explains that executives need to appreciate how their heavy reliance on crypto deposits could spark contamination in their customer base.
Some organizations in the crypto industry have raised an eyebrow at this development. The argument is that Bassel’s requirements seem inappropriate given that cryptocurrency accounts for a tiny fraction of global banking assets.
While teh proposed crypto disclosure is still in the consultation phase, if implemented, it ensures visibility and transparency between traditional banking and the cryptocurrency asset industry.