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Global Regulators Consider Capital Requirements on Bank Crypto Holdings

Cryptocurrency assets held by banks may soon become subject to new capital requirements enforced by global financial regulators, as they struggle to fit digital currencies into conventional asset ordinance.

In a report published Monday by the Financial Stability Board (FSB), the Basel Committee on Banking Supervision outlined an agenda of promoting financial stability through strengthening regulation and supervision of banks worldwide. The report was aimed at its 20 members and proposed capital requirements for crypto assets held by banks.

The regulations offered in the review would require capital lenders to adjust their services to the cryptocurrency market, namely protecting themselves against market volatility and other accompanying threats. While these regulations would bring digital currency assets in line with existing rules for established forms such as mortgages, they could push up financing costs for firms.

The Basel Committee’s members include the US Federal Reserve, as well as the European Central Bank. An ongoing study by the committee is researching how each member currently treats domestic cryptocurrency asset exposure. The FSB is reportedly waiting for the results of this inquiry before clarifying the applicability, or details of the new capital requirements.

The FSB’s position on crypto

While the FSB has said it does not believe digital currency assets present a threat to current financial order, it has continued to study and develop ways of surveying the market. Issues including pump and dump schemes, manipulation, access to price information, and volatility have been cited by the FSB as necessary to amend.

Bank of England Governor Mark Carney chairs the FSB, who is himself a vocal critic of cryptocurrencies. In March, he called for an end to what he described as the ”anarchy” surrounding the industry, saying the time had come for digital assets to face the same regulations as the rest of the financial system.

This sentiment expressed falls along a very similar line of the proposed standardization of regulating cryptocurrency assets the way traditional assets are.

 

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