New BIS Plan Promotes Monitoring Of Banks’ Crypto Holding

Key Points:

• The new BIS plan may require banks to disclose their cryptocurrency holdings to address risks.
• The Basel Committee’s proposal follows earlier recommendations for capital reserves.
• The BIS is also tracking cryptocurrency transactions to assess their macroeconomic impact.

In a move aimed at addressing concerns about the impact of cryptocurrencies on traditional finance (TradFi), international regulators are considering new disclosure requirements for banks regarding their cryptocurrency holdings under the new BIS plan.

The New BIS Plan Considers Crypto Disclosure Rules for Banks

The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS), responsible for setting norms for traditional lenders, has been increasingly concerned about the rising popularity of cryptocurrencies and their potential risks to the financial system.

The committee had previously recommended that banks hold significant capital reserves to cover their exposure to unbacked cryptocurrencies. Now, they have taken a step further by proposing disclosure requirements.

The new BIS plan will complement the prudential standard for cryptoasset exposures published in December 2022. The consultation paper outlining these requirements is expected to be released soon.

This development signifies a significant shift in the Basel Committee’s approach to cryptocurrency regulation. While they had previously mentioned the monitoring of crypto norms, the idea of separate disclosure rules is a new addition.

BIS Explores Impact of Cryptocurrency on Global Economy

The sudden surge in cryptocurrency popularity is viewed as one of the factors indirectly responsible for the turmoil in traditional finance that occurred in March. Other contributing factors include the growth of non-bank financial intermediation and the advent of faster digital payment systems allowing quick withdrawals by depositors.

Additionally, the BIS has collaborated with several central banks on a successful proof-of-concept (PoC) project called Project Atlas. This project aims to track both on-chain and off-chain transactions from cryptocurrency exchanges and public blockchains.

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