The international financial community has criticized the Basel Committee on Banking Supervision (BCBS) proposal for a prudential regime for crypto assets.
Regulatory Director of the Institute of International Finance (IIF) Richard Gray, on behalf of a joint working group of the bankers’ association that studied the BCBS proposal, stated that the requirements for banks to prevent the risks of buying cryptocurrencies are inconsistent:
“Banks are already experts in risk management and consumer protection.”
In June, BCBS proposed that the lender’s stake in fiat currencies such as bitcoin and ether should not exceed 1% of the core capital for banks. According to the financial community, this restriction “is outrageous and should be changed.”
Lobbyists believe that if the problem is not resolved, it “may make it economically impractical and irrational to invest in crypto assets.” And, probably, it will lead to “a shift in activity in the crypto space to the non-banking sector”, which is not currently properly regulated.
Lobbying groups want to raise the bar from 1% to 5% of the bank’s Tier 1 capital, the main financial instruments used by the bank. In response, the Basel Committee proposed adding together all the individual crypto risks to calculate if the limit would be violated.
The association was not satisfied with this decision. Its representatives said long and short positions could actually cancel each other out, isolating the lender from price volatility.
For crypto assets that are considered more stable, such as tokenized securities and fiat-backed stablecoins, additional fees should apply. After all, according to the Committee, this will reflect the “various unforeseen risks” of infrastructure based on distributed ledger technology (DLT).
But the lobbying paper says the additional 2.5% capital charge for infrastructure risk “could undermine the market” and “make the decision to use DLT infrastructure unattractive.”
The reason for the harsh criticism of lobbyists against the BCBS proposal is related to the fact that the regulator began to develop a new version of the recommendations on the regulation of cryptocurrencies in June, being impressed by the collapse of Terra and the wave of defaults.
Source: Bits
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