The Basel Committee on Banking Supervision, a part of the Bank for International Settlements (BIS), released a consultation paper on October 17, proposing the mandatory disclosure of cryptocurrency exposures by banks. Comprising central banks and financial authorities from 28 jurisdictions, the Basel Committee serves as a platform for regulatory collaboration on banking regulatory matters. The recent consultation paper is an extension of the disclosure guidance outlined in the final prudential standard published in December 2022, focusing on how banks should manage risks associated with crypto assets.
The primary objective of this consultation paper is to establish a standardized "Bank Crypto Asset Risk Disclosure Form and Set of Templates" with a proposed implementation date of January 1, 2025. The proposal has been made available for public input until January 31, 2024, with the results set to be published on the Basel Committee's website.
Under these newly proposed regulations, banks will be mandated to provide quantitative data on their crypto-asset exposures, along with the corresponding capital and liquidity requirements. They must also furnish qualitative data concerning activities related to cryptocurrencies. Furthermore, banks will need to supply accounting classification information regarding their exposure to crypto assets and liabilities.
The Basel Committee contends that the utilization of a harmonized disclosure format will promote the application of market discipline and help reduce information disparities between banks and market participants. In a prior review conducted in June, the committee had examined crypto assets and bank exposures, although it didn't delve deeply into the subject. During that review, the committee's focus was primarily on permissionless blockchains and eligibility criteria for "Group 1" stablecoins.
The Bank for International Settlements has actively engaged in cryptocurrency consultations and the scrutiny of regulatory aspects linked to decentralized technologies. Recently, the Bank for International Settlements, in conjunction with some European central banks, unveiled conceptual frameworks for developing systems designed to track international flows of cryptocurrencies.
