Banks' Crypto Assets May Get Hit With Capital Requirements (1)
Basel Committee is analyzing extent of lenders’ exposures
FSB says crypto doesn’t currently threaten financial stabilityBy Silla Brush
(Bloomberg) -- Global regulators signaled they may force banks to meet new capital requirements for their holdings of Bitcoin and other crypto-assets.
The regulations would determine how much capital lenders need to protect themselves against losses, short-term market volatility and other threats, and could push up firms’ financing costs. Global regulators are trying to fit Bitcoin and its offspring into existing rules designed for more conventional assets like mortgages and securities.
The Basel Committee on Banking Supervision’s work is designed to “strengthen the regulation, supervision and practices of banks worldwide, with the purpose of enhancing financial stability,” the Financial Stability Board said on Monday in a report to the Group of 20 countries on global regulators’ work on crypto-assets.
The Basel Committee is studying how its members, which include the U.S. Federal Reserve, the European Central Bank and Japan’s Financial Services Agency, treat crypto-asset exposures in their domestic prudential rules. Based on the results of this review and an analysis of banks’ direct and indirect exposures, the regulator will consider whether to formally clarify the prudential treatment of crypto-assets, according to the FSB.
Bitcoin and rival coins Ripple, Ethereum and Litecoin all gained on Monday after BlackRock Inc. became the latest big name to signal an interest in the technology underpinning digital currencies.
While the FSB, a panel set up after the 2008 crisis, said crypto-assets don’t currently threaten the financial system, it continues to study their growth and is trying to develop ways to monitor trading. The FSB said there are challenges to the data and information about prices, trading volumes and volatility “may be manipulated” through “pump and dump” and other schemes.
The study is the latest indication of regulators’ desire to rein in crypto-assets. Band of England Governor Mark Carney, who chairs the FSB, has called for an end to the “anarchy” surrounding the products, saying the time has come “to hold the crypto-asset ecosystem to the same standards as the rest of the financial system.”(Updates with Bitcoin price gain in fifth paragraph, adds chart.)--With assistance from Edward Robinson and Todd White.
To contact the reporter on this story:
Silla Brush in London at sbrush@bloomberg.net
To contact the editors responsible for this story:
Neil Callanan at ncallanan@bloomberg.net
Patrick Henry, Andrew Blackman