The Basel Banking Supervisory Board (BCBS) has announced that banks are in public consultation to establish a prudent policy on cryptocurrencies. This was reported by Coinpost on the 8th.
BCBS is an international financial rules-setting body established by the G10 Central Bank Governors Conference. It is composed of financial authorities from various countries such as the United States, Japan, and the EU, and has a secretariat in Basel, Switzerland.
In an official announcement on June 7, BCBS said that they had discussed the steps to set up “the development of the cryptocurrency-related market and the prudent policy of banks on cryptocurrency exposure.”
[Cryptocurrency market growth background]
Against this background, BCBS explained:
“Banks’ exposure to cryptocurrencies is currently limited, but cryptocurrencies and related services continue to grow and bring innovation. Some banks have increased their interest in them, and in the absence of a specific and prudent policy, it could increase global financial stability concerns and risks to the banking system.”
Although there are still some banks that are gaining exposure to cryptocurrencies (which are generally affected by market price fluctuations), the number of banks paying attention to cryptocurrencies is increasing, so it is the position that handling rules are necessary for the future.
Therefore, BCBS is said to have agreed to open consultations to solicit input from stakeholders on the design of the handling policy. The agreement will be issued within one week.
The public consultation also takes into account the response to BCBS’s previously issued cryptocurrency agreements and initiatives promoted by international forums and standards-setting organizations.
In 2019, BCBS solicited public comments on its cryptocurrency regulatory policy. At this time, he selected ‘the role and risks of cryptocurrency that banks should understand in conducting cryptocurrency business carefully’ as one of the focus points.
A prudent practice is usually to have banks measure the risk of different types of assets, such as loans and derivatives, and set the amount of capital they hold accordingly.
The Basel Banking Supervisory Board (BCBS) has no legal mandate, although its mission is to increase global financial stability. BCBS is a format for reporting major decisions to the central bank governor or group of supervisors and seeking approval. BCBS decisions are not legally binding and the introduction of those decisions into policy varies from country to region participating in BCBS.
[Policy regarding the corona pandemic]
BCBS discussed its policy on the novel coronavirus pandemic along with discussions on cryptocurrency. He went on to point out that “the global economic environment is uncertain” and that “banks and regulators need to remain vigilant against new risks and vulnerabilities.” He said, “We should keep loans to households and businesses with credit.”
[Large Banks Watching Cryptocurrency Trends]
As the cryptocurrency market emerges, existing banks are also monitoring the trend and some banks are considering providing related services.
For example, at a Congressional hearing in May, representatives of the three largest conglomerates, Citibank, Wells Fargo, and Bank of America, said they were paying attention to cryptocurrency. Although Bank of America is cautious, there are also reports that Citibank and Wells Fargo are considering cryptocurrency-related services.
A Citibank representative said it was the bank’s responsibility to ensure a clear governance system before engaging in cryptocurrencies. International rule reform, such as that promoted by BCBS, is also expected to be important in that it provides clear standards for banks to participate in cryptocurrency-related services.
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Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.