Abstract : The continued growth of cryptocurrency trading platforms and new financial products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.
March 14 (ChainDD) In its statement released on March 13, the Basel Committee on Banking Supervision (BCBS) warned that while the cryptocurrency currently is small relative to the global financial system, the continued growth of cryptocurrency trading platforms and new financial products related to cryptocurrency has the potential to raise financial stability concerns and increase risks faced by banks.
BCBS is an international collaborative organization for banking supervision under Bank for International Settlements (BIS)—also known as a bank of central banks. It has 45 members which comprise central banks and bank supervisors from 28 jurisdictions.
According to the recent statement, BCBS noted that cryptocurrencies are not legal tender, and do not provide the standard functions of money and act as the safe medium of exchange or store of value. They present a number of risks for banks, including liquidity risk, credit risk, market risk, operational risk, money laundering and terrorist financing risk, and legal and reputation risks.
Therefore, BCBS expects if a bank is authorized and decides to acquire crypto-asset exposures or provide related services, it should conduct due diligence, have a clear and robust risk management framework, publicly disclose any cryptocurrency exposures or related services, inform its supervisory authority of actual and planned cryptocurrency exposures or activity timely, and assure it has fully assessed the activity and risks associated with intended exposures and services, as well as how to it has mitigated these risks.