An institutionalisation dynamic on the crypto-assets market is underway.
While an increasing number of banks are developing or planning to develop activities related to crypto-assets, the Basel Committee has just initiated a consultation on the appropriateness and terms and conditions for their prudential treatment. This consultation is an opportunity for banks to contribute to the establishment of international standards to ensure the sustainable and robust development of their activities in relation to crypto-assets.
On 12 December 2019, the Basel Committee, an international body bringing together the prudential regulators of the world's major financial jurisdictions, published a consultation paper on designing a prudential treatment for crypto-assets. This consultation is a strong signal of the recognition of the existence of banking activities in the realm of crypto-assets.
It is part of a broader work programme set up by the Basel Committee to monitor the evolution of the crypto-assets market and its impact on traditional banking players. In March 2019, the Basel Committee publicly issued a first set of recommendations for banks investing in or developing activities related to crypto-assets. These included the importance for banks to apply appropriate due diligence to assess new types of risks associated with crypto-assets; to have appropriate governance and risk management policies; and to be transparent about the risks incurred, both as regards their clients and supervisory authorities.
In its latest publication, the Basel Committee also details the characteristics and risks associated with crypto-assets and solicits stakeholders on the specifics of a possible prudential treatment of banks' exposure to crypto-assets. The deadline for responding to the consultation is 13 March 2020.
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