Global banking regulators are pushing for punitive rules on investments in crypto assets by financial instutions.
While banks’ exposures to cryptoassets are currently limited, the regulatory body believes that “continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment”.
While certain certain tokenised traditional assets and stablecoins could be managed under existing rules, speculative investments in wildly fluctuating cryptcurrencies such as bitcoin and ethereum will face a more hardline regime.
Under the proposals, banks would need to set aside enough capital in reserve to cover any losses on bitcoin holdings in full, equivalent to existing banking capital rules on the most riskiest investments.
The proposal are not yet set in stone and will likely entail further consultations, but as it stands the murmurings from the Basel Committee will likely prove a strong deterrent to banks pondering a punt on crypto market valuations.