The global banking regulators have taken a significant step towards increasing transparency in the financial sector. The Basel Committee, comprising banking regulators from major global financial hubs, has introduced a proposal to enforce standardized disclosure of crypto assets by major banks starting from January 2025.
This move aims to bolster "market discipline" by offering investors a comprehensive view of banks' crypto holdings and activities. The Basel Committee, one of the Bank for International Settlements' (BIS) committees, took this step after establishing new rules in December last year that dictate the amount of capital banks must maintain to cover various categories of crypto assets.
BIS' Crypto Asset Reporting Framework
According to a statement on BIS' website, the Basel Committee has released a new framework for public consultation, outlining how banks should report their crypto asset holdings to the public.
According to the proposal, banks must provide qualitative and quantitative information regarding their dealings with crypto assets. This information will encompass details on their exposure to crypto assets, the corresponding capital and liquidity requirements, and the activities related to these digital assets.
The Basel Committee stated: "Banks would also be required to provide details of the accounting classifications of their exposures to crypto assets and crypto liabilities. The committee expects that a common format for disclosures will support the exercise of market discipline and help to reduce information asymmetry between banks and market participants."
A new Basel Committee consultative document proposes a standardised disclosure table and set of templates for banks’ cryptoasset exposures: comments welcome by 31 January 2024 https://t.co/SzMwXNxuQF pic.twitter.com/0e7lXWspab
— Bank for International Settlements (@BIS_org) October 17, 2023
Shifting Stance on Digital Assets?
These proposed measures are set to play an important role in ensuring that banks adhere to the regulations in the rapidly growing digital asset industry. The efforts of the Basel Committee are a shift from its previous stance on digital assets.
In July, the BIS submitted a report to the Group of Twenty (G20) and the European Union, advocating against adopting cryptocurrencies as a monetary instrument. It cited "inherent structural flaws" and emphasized the instability and inefficiency in the stablecoin sector.
BIS expressed its view that cryptocurrencies have thus far failed to utilize innovation for the betterment of society, casting doubt on their role in the future of finance. It highlighted their instability, inefficiency, lack of accountability, and the absence of a meaningful contribution to real economic activity.
However, the report did acknowledge that cryptocurrencies possess elements of innovation, such as programmability and the ability to automate transactions and integrate with other systems. These features, in conjunction with asset tokenization, have the potential to reduce transaction costs.
The global banking regulators have taken a significant step towards increasing transparency in the financial sector. The Basel Committee, comprising banking regulators from major global financial hubs, has introduced a proposal to enforce standardized disclosure of crypto assets by major banks starting from January 2025.
This move aims to bolster "market discipline" by offering investors a comprehensive view of banks' crypto holdings and activities. The Basel Committee, one of the Bank for International Settlements' (BIS) committees, took this step after establishing new rules in December last year that dictate the amount of capital banks must maintain to cover various categories of crypto assets.
BIS' Crypto Asset Reporting Framework
According to a statement on BIS' website, the Basel Committee has released a new framework for public consultation, outlining how banks should report their crypto asset holdings to the public.
According to the proposal, banks must provide qualitative and quantitative information regarding their dealings with crypto assets. This information will encompass details on their exposure to crypto assets, the corresponding capital and liquidity requirements, and the activities related to these digital assets.
The Basel Committee stated: "Banks would also be required to provide details of the accounting classifications of their exposures to crypto assets and crypto liabilities. The committee expects that a common format for disclosures will support the exercise of market discipline and help to reduce information asymmetry between banks and market participants."
A new Basel Committee consultative document proposes a standardised disclosure table and set of templates for banks’ cryptoasset exposures: comments welcome by 31 January 2024 https://t.co/SzMwXNxuQF pic.twitter.com/0e7lXWspab
— Bank for International Settlements (@BIS_org) October 17, 2023
Shifting Stance on Digital Assets?
These proposed measures are set to play an important role in ensuring that banks adhere to the regulations in the rapidly growing digital asset industry. The efforts of the Basel Committee are a shift from its previous stance on digital assets.
In July, the BIS submitted a report to the Group of Twenty (G20) and the European Union, advocating against adopting cryptocurrencies as a monetary instrument. It cited "inherent structural flaws" and emphasized the instability and inefficiency in the stablecoin sector.
BIS expressed its view that cryptocurrencies have thus far failed to utilize innovation for the betterment of society, casting doubt on their role in the future of finance. It highlighted their instability, inefficiency, lack of accountability, and the absence of a meaningful contribution to real economic activity.
However, the report did acknowledge that cryptocurrencies possess elements of innovation, such as programmability and the ability to automate transactions and integrate with other systems. These features, in conjunction with asset tokenization, have the potential to reduce transaction costs.
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