The Basel banking regulator has stated that cryptocurrency spreading may be bad news for the future of the global banking system.
The Swiss authority that runs within the Bank of International Settlements is working on the single standards and methodology of banking regulations. The representative of the Basel Committee of Banking Supervision cited the increasing popularity of the cryptocurrencies though they bring heavy risks and feature strong volatility.
Although digital assets as financial instruments are just at the very beginning of its path, it has already brought a lot of risks to the banks in terms of the issues connected with liquidity, credits, fraud schemes and money laundering.
"While the crypto-asset market remains small relative to that of the global financial system, and banks currently have very limited direct exposures, the Committee is of the view that the continued growth of crypto-asset trading platforms and new financial products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks," the regulator stated in the report on its website.
As a result, the Committee has determined and unveiled the list of the standards that should be followed by the banks while dealing with the cryptos. The report suggests that banks have to study all the possible risks as well as check the companies at first and only then decided on further cooperation with them. Moreover, reliable risk management system is a "must-have" for banking institutions.
For now, the authority keeps an eye on the further cryptocurrency expansion "including banks' direct and indirect exposures to such assets." The work on this issue is performed in close cooperation with the units that determine global standards as well as the Financial Stability Board.
The Committee continues to monitor developments in crypto-assets, including banks' direct and indirect exposures to such assets. The Committee will in due course clarify the prudential treatment of such exposures to appropriately reflect the high degree of risk of crypto-assets. It is coordinating its work with other global standard-setting bodies and the Financial Stability Board.