Bank for International Settlements proposes compulsory disclosure of banks' crypto exposure

Introduction

The Basel Committee on Banking Supervision, a forum for regulatory cooperation on banking supervisory matters, has released a consultation paper proposing that banks disclose their exposure to cryptocurrencies. The proposed regulations aim to standardize disclosure practices and promote market discipline.

Details of the proposal

The consultation paper, based on guidelines released in December 2022, suggests a standardized "disclosure table and set of templates" for banks' crypto asset exposures. The proposed implementation date for these regulations is January 1, 2025. The Basel Committee is seeking public comment on the proposal until January 31, 2024.

What banks will be required to disclose

Under the proposed regulations, banks will be required to provide quantitative data on their exposures to crypto assets, including the corresponding capital and liquidity requirements. They will also need to offer qualitative data on their activities related to cryptocurrencies. Additionally, banks will disclose information on the accounting classifications of their exposure to crypto assets and liabilities.

Promoting market discipline

The Basel Committee believes that adopting a uniform disclosure format will promote the application of market discipline and reduce information asymmetry between banks and market participants. By providing standardized information, investors and regulators will have a clearer understanding of banks' crypto assets exposure.

Previous focus on crypto assets

This is not the first time the Basel Committee has examined crypto assets and bank exposure. In June, the committee briefly touched on the topic, focusing on permissionless blockchains and eligibility criteria for "Group 1" stablecoins.

The role of the Bank for International Settlements

The Bank for International Settlements (BIS) has been actively involved in crypto consultations and exploring the regulatory aspects of decentralized technology. Alongside several European central banks, the BIS recently published details of a concept to develop a system for tracking international flows of cryptocurrencies.