A group of finance industry bodies has called for a rethink of upcoming crypto regulatory standards, warning these rules will make it difficult for banks to participate in crypto markets.

Basel Committee’s 2022 Crypto Standards Under Scrutiny

In 2022, the Basel Committee on Banking Supervision, composed of regulators and central banks from major financial centres, set standards for how banks should manage and disclose risks related to crypto asset exposure.

Now, industry groups say these standards are too conservative given recent changes in the crypto market.

Industry Groups Highlight Rapid Changes in Crypto Markets

The open letter to the committee explains that while crypto remains a small part of the overall financial system, it has grown quickly, with cryptocurrency prices reaching record highs and becoming more connected to mainstream markets.

Calls to Pause and Review the Implementation Timeline

The letter urges the Basel Committee to “temporarily pause” the implementation of the new standards, gather fresh information, and consider making adjustments.

The signatories include the Global Financial Markets Association, the Institute of International Finance, the International Swaps and Derivatives Association, and crypto industry groups.

Impact of Crypto Collapses on Regulatory Demands

In 2022, several major crypto companies collapsed, causing millions of investors to lose money and exposing misconduct in the sector.

This has driven calls for stronger regulation, which the Basel Committee’s standards aim to address.

However, the letter argues the “restrictive qualification standards” and harsh capital treatments effectively make it uneconomical for banks to engage meaningfully in crypto.

PHOTO: UNSPLASH

This article was created with AI assistance.