The Basel Committee on Banking Supervision (Basel Committee), a committee of global central bankers and regulators, issued a Consultative Document on June 10 on the prudential treatment of cryptoasset exposures for international banks (the Proposal). The Basel Committee has asked for comments by September 10, 2021.
Notwithstanding the relatively limited exposure that international banks have incurred thus far with respect to cryptoassets, the Proposal identifies the growth of cryptoassets and related services as a potentially significant source of risk for banking organizations and overall financial stability. Such risks include liquidity risk, credit risk, market risk, operational risk (including fraud and cyber risks), money laundering/terrorist financing risk, and legal and reputation risks.
Although the Proposal is styled as a discussion of prudential treatment of cryptoassets, all but one page of the document is devoted to the risk-based regulatory capital treatment of such assets. Under the Proposal, cryptoassets would be evaluated for such risks, classified into one of two groups (Group 1, including subgroups 1a and 1b, and Group 2) and assigned a regulatory capital…
