Basel Committee Hands Down Crypto Guidance for Banks

Banks should be more cautious when setting aside capital to cover risks from unbacked cryptocurrency assets, the Bank of International Settlements’ (BIS’) Basel Committee said in a series of proposals Thursday (June 30).

The recommendation comes after weeks of instability in the crypto markets, set off in part by the collapse of the stablecoin TerraUSD.

This has left regulators such as Basel concerned about a lack of regulation in the crypto sector. The recommendation handed down Thursday said cryptocurrencies that aren’t backed by traditional currencies should be approached conservatively when it comes to setting aside capital.

The committee said it will welcome public comment on its proposal until Sept. 30.

“Given the rapid evolution and volatile nature of the crypto asset market, the committee will continue to closely monitor developments during the consultation period,” the report stated. “The standards that the committee aims to finalize around year-end may be tightened if shortcomings in the consultation proposals are identified or new elements of risks emerge and based on the committee’s overall assessment of the risks.”

Last June, the Basel Committee issued its first recommendation on cryptocurrencies, arguing banks need to carry enough capital to cover losses on bitcoin holdings in full.

Read more: Basel Committee Exploring Cryptoasset Regulation for Banks

This latest recommendation came one day after policymakers in Europe settled on new anti-money laundering (AML) rules for crypto transactions.

See more: EU Agrees on Strong AML Checks for Crypto

According to the agreement, the parties will need to verify customer identities even for the smallest crypto transfer between digital wallets, something that was in the draft of this policy written last year. In a departure from that draft, lawmakers decided to leave most small payments or transfers to unhosted private wallets out of AML checks.

However, payments to unhosted wallets that exceed 1,000 euros (about $1,050) will still need to be reported, in keeping with similar provisions for traditional banking transfers.

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