The Bank for International Settlements (BIS) Basel Committee on Banking Supervision issued a consultation paper on October 17, proposing to force banks to disclose their cryptocurrency risk exposures.
The Basel Committee consists of central banks and financial authorities from 28 jurisdictions and is a forum for supervisory cooperation on banking supervisory matters. The latest consultation paper follows disclosure guidance in the final prudential standard published in December 2022 on how banks should handle crypto asset risks.
The consultation document aims to develop a standardized “Bank Crypto Asset Risk Disclosure Form and Set of Templates” with a proposed implementation date of January 1, 2025. The Basel Committee has opened the proposal for public comment until January 31, 2024, after which the results will be published on its website.
Under the new proposed regulations, banks will be required to provide quantitative data on crypto-asset risk exposures and corresponding capital and liquidity requirements. Banks are also required to provide qualitative information on cryptocurrency-related activities.
Additionally, banks will be required to provide accounting classification information regarding their exposure to crypto assets and liabilities. In its proposal, the committee claimed that the use of a unified disclosure format would encourage the application of market discipline and reduce information asymmetries between banks and market participants.
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The committee also reviewed crypto assets and bank exposures in June. At the time, the committee did not delve into the topic, mentioning only that it was focused on permissionless blockchains and eligibility criteria for “Group 1” stablecoins.
The Bank for International Settlements has been actively involved in consulting on cryptocurrencies and reviewing the regulatory aspects of decentralized technology. Recently, the Bank for International Settlements and some European central banks unveiled conceptual details for developing systems to track international flows of cryptocurrencies.
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