Global Banking Watchdog, BIS, to Publish Paper on ‘Prudential Treatment’ of Crypto Assets by Banks

Meanwhile, former SEC Chairman Jay Clayton, under whom the agency didn’t make any strides in reference to digital assets, is now talking about no need for a new regulatory regime specifically for crypto and “a serious risk” of overregulation.

The Basel Committee on Banking Supervision said on Monday that it would consult on how lenders should shield themselves from crypto assets. The Swiss-based watchdog said in a statement,

“The committee agreed to publish a consultation paper to seek the views of external stakeholders on the design of prudential treatment of banks’ exposures to cryptoassets.”

Banks are typically required to assign “risk weightings” to each type of asset, such as loans, to determine how much capital should be held.

The committee (BCBS), which is made up of regulators including Central Banks and authorities responsible for banking regulation, said it discussed crypto assets last Friday and will publish its consultation paper this week.

“While banks’ exposures to crypto assets are currently limited, the 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.”

Amidst this, former US Securities and Exchange Commissioner (SEC) Jay Clayton, under whom the regulator didn’t make any strides in reference to crypto assets, is now writing about no need for a new regulatory regime specifically for crypto, in a piece in the Wall Street Journal.

“Innovation is rarely smooth or predictable,” wrote Clayton. According to him, a digital revolution is underway in the financial services industry, and there’s “a serious risk of both over-regulation and under-regulation.”

He urged regulators to look past the superficial labels and ask how a token, digital wallet, cryptocurrency, or crypto exchange is being used and what existing instrument or process the new technology competes with and then regulate it accordingly.

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