International banking regulator, the Basel Committee on Banking Supervision, has released draft guidelines requiring banks to divulge detailed information about their involvement in the cryptocurrency sector.
These guidelines are a part of the committee’s broader efforts to ensure that banks do not engage in risky activities, such as holding unbacked cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), which have recently caused turbulence in the crypto-linked lending industry, affecting banks like Signature Bank and Silicon Valley Bank.
According to the proposals, slated to take effect in 2025, banks will be mandated to provide both qualitative and quantitative information regarding their crypto activities. This disclosure should encompass details about their exposure to crypto assets, along with the associated capital and liquidity requirements.
The Basel Committee, affiliated with the Bank for International Settlements, a consortium of central banks headquartered in Basel, Switzerland, explained that this standardized disclosure format will promote market transparency and address information disparities between banks and market participants.
These plans were initially hinted at by the committee two weeks ago and are part of their ongoing efforts to establish norms for traditional financial institutions, aiming to prevent a recurrence of the 2008 financial crisis. The guidelines are now open for public consultation until January 2024.