Basel Chair Calls for New Crypto Rules for Banks

The head of a global banking regulator is calling for an overhaul of cryptocurrency regulations.

The rules that require banks to hold large amounts of capital to cover potential losses on crypto have to be rewritten after the U.S. and Great Britain refused to enact them, Erik Thedéen, chair of the Basel Committee on Banking Supervision, said in an interview with the Financial Times (FT) Wednesday (Nov. 19).

Thedéen said “a different approach” was needed on the global rules for banks’ cryptocurrency holdings, but that this would be tough to accomplish due to “different views” among regulators.

As the FT notes, the rapid rise of stablecoins, created to be a safer form of crypto assets but would still be covered by the most stringent Basel rules, have led calls from American U.S. banks and officials for the Basel committee to reexamine its crypto framework.

“What has happened has been fairly dramatic,” said Thedéen, who also serves as governor of Sweden’s central bank. “This very strong increase in stablecoins and how much assets are in that system calls for a different approach.”

His comments came weeks after a report that a group of countries, led by the U.S., were calling on the committee to amend its rules.

And in August, a group of global financial trade associations called on the Basel Committee to reconsider its Crypto Asset Exposure Standard before it went into effect.

Writing to the committee, these associations said that the standard’s capital treatment of crypto assets is too conservative and punitive, not in line with actual risks and inconsistent with modern market risk management practices.

“The prudential framework for those markets should not discourage participation by imposing overly punitive capital requirements that are inconsistent with actual risks,” the letter said. “If banks choose to participate, they should be able to do so within a technology-neutral framework that is proportionate and risk-sensitive.”

In other cryptocurrency regulation news, the U.S. Office of the Comptroller of the Currency this week published an interpretive letter which the regulator said confirmed that for specified activities, national banks can pay crypto-asset network fees and hold crypto assets as principal.

“As with any activity, a national bank must conduct these activities in a safe and sound manner and in compliance with applicable law,” the regulator said in a news release.

PYMNTS reported in July that the confirmation of Jonathan Gould as comptroller of the currency signaled a relaxation of crypto regulations, particularly for banks.