According to a plan devised by the Basel Committee on Banking Supervision, banks with cryptocurrency exposure will have to disclose their crypto holdings. Yesterday, the Committee, which sets norms for lenders in traditional finance, announced the plan to implement disclosure requirements for banks related to their digital asset exposures and risks.
With the collapse of crypto exchange FTX (sending Bitcoin to its lowest price since 2020), along with failures of regional banks like Signature Bank and Silicon Valley Bank, the year 2023 has been choppy.
The newly proposed rules by the banking regulation committee come as international regulators are of the opinion that this year’s banking collapse was partly because of the sudden hype around crypto.
Thus, lenders will now be forced to reveal the size and nature of their unbacked crypto holdings such as Bitcoin and Ethereum, a move focused on increasing transparency and hence reducing industry contamination.
The Committee said, “The March 2023 banking turmoil was the most significant system-wide banking stress since the Great Financial Crisis in terms of its scale and scope. In response, the Committee is today publishing a report that assesses the causes of the turmoil, the regulatory and supervisory responses, and the initial lessons learnt.”
The Committee added that a consultation paper will be published soon, which will propose “a set of disclosure requirements related to banks’ crypto asset exposures. These disclosures would complement the prudential standard for such exposures that was published in December 2022.”
Notably, the Basel Committee, which comprises banking authorities from 28 global jurisdictions, including the United States, the U.K. and the European Union, had previously hinted that it would monitor norms related to cryptocurrencies and modify them if needed.
However, until now, the Committee had never disclosed the idea of separate disclosure rules for lenders’ crypto exposure.
Thus, if the plan is implemented, banks like JPMorgan JPM and others with crypto exposure will have to disclose their holdings.
Notably, in July 2021, JPM became the first major bank in the United States to allow its financial advisors to give all its wealth management clients access to cryptocurrency funds. JPMorgan has also been offering its Private Bank wealth management customers access to an in-house passively managed Bitcoin fund.
The Wall Street giant launched a division focused on digital assets named Onyx and its digital currency, JPM Coin. JPM Coin was launched in 2019 to allow corporate clients to move euros and dollars internally.
Moreover, JPM is in the early stages of exploring the concept of launching a blockchain-based deposit token for customers.
However, because of increased scams and fraud cases, JPMorgan’s retail bank, Chase, in the U.K. decided to restrict customers’ access to cryptocurrency-related transactions. The bank said that from Oct 16, there will be a limit on the ability of its customers to engage in crypto transactions in the U.K.
Chase is not the first bank to block or restrict crypto transactions. Earlier this year, banks like NatWest Group plc NWG and Banco Santander SAN imposed tighter restrictions on U.K. customers looking to use crypto.
In order to protect its customers from crypto-related scams, NatWest imposed new limits on the daily and monthly amount consumers can send to crypto exchanges. Now, NWG customers can only send a maximum of £1,000 per day and £5,000 over a 30-day period to crypto exchanges.
Similarly, Spain’s Santander said that it would block U.K. customers from sending real-time payments to crypto exchanges. While SAN prohibits payments from a customer’s account to Binance, customers can transfer funds to their accounts from Binance.
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