Banking Bosses Opposed to Basel Crypto Mandates

Banking bosses from the largest financial institutions in the U.S. and Europe have voiced their opposition to the cryptocurrency mandates handed down by the Basel Committee for Banking Supervision (BCBS), which proposes strict capital requirements for every dollar of bitcoin owned.

The BCBS — comprised of 45 central banks and bank supervisors from 28 regions — is the primary agency that sets the global standard for bank regulations and offers a vehicle for banking supervisory matters. The committee doesn’t enforce regulations but institutes minimum standards that regulators worldwide can implement.

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Expressing concerns about consumer protection, money laundering and terrorist financing threats, the BCBS — which includes the Federal Reserve and the European Central Bank — would require banks to set aside a dollar in capital for every dollar of bitcoin they own.

The Global Financial Markets Association (GFMA), which includes members such as JPMorgan Chase & Co. and Deutsche Bank, along with five other banking industry groups, sounded off against the measures in a letter published Monday (Sept. 20).

The letter was signed by the Financial Services Forum, the Futures Industry Association, the Institute of International Finance, the International Swaps and Derivatives Association and the Chamber of Digital Commerce, as well as the Global Financial Markets Association.

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“The prudential framework envisaged by the consultation would create material impediments to regulated bank participation in crypto asset markets. Not only do certain elements of the proposal make bank involvement in the crypto asset market cost-prohibitive from a capital perspective, other elements, such as operational requirements for tokenized assets, are unlikely to be able to be satisfied in practice,” the letter to the Basal Committee indicated.

The trade associations maintain that the proposed mandates are futile because they would ultimately prevent banks from holding cryptocurrencies at all. Further, they said the high-risk weight was excessive for highly traded cryptos like bitcoin and ether.

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“We find the proposals in the consultation to be so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto asset markets,” per the letter.

Kenneth E. Bentsen Jr., CEO of GFMA and president and CEO of SIFMA, said in a GFMA press release that the association feels that distributed ledger technology and blockchain are enough to “drive efficiencies and help customers,” and there is value and transparency by “delivering those benefits through banks.”