Banks’ crypto exposure must be disclosed — BIS’ Basel Committee

The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) released a consultation paper on Oct. 17, proposing to make it compulsory for banks to disclose their crypto exposure.

The Basel Committee comprises central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervisory matters. The latest consultation paper is based on the disclosure guidelines in the final prudential standard on how banks should handle their exposure to crypto assets released in December 2022.

The consultation paper focused on crypto assets exposure for banks aims to set a standardized “disclosure table and set of templates for banks’ crypto-asset exposures” with a proposed implementation date of Jan. 1, 2025. The Basel Committee has opened the proposal for public comment until Jan. 31, 2024, the results of which will be published on the BIS website.

Under the new proposed regulations, banks would be required to provide quantitative data on exposures to crypto assets and the corresponding capital and liquidity requirements. The banks would also be required to offer qualitative data on their activities linked to cryptocurrencies.

Additionally, the banks will be required to offer information on the accounting classifications of the exposures that they have to crypto assets along with the liabilities. The committee in its proposal noted that using a uniform disclosure format will encourage the application of market discipline and lessen information asymmetry between banks and market participants.

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The Basel committee also reviewed the topic of crypto assets and bank exposure in June earlier this year. At the time, the committee didn’t delve deeply into the topic, mentioning only that they were focusing on permissionless blockchains as well as the eligibility criteria for “Group 1” stablecoins.

The BIS has been actively involved with crypto consultations and looking at the regulatory aspect of the decentralized technology. Earlier, in the first week of October, the BIS and a handful of European central banks were working to develop a system to track international flows of cryptocurrencies.

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