The Basel Committee on Banking Supervision has weighed in on cryptocurrencies. Punitive new proposals from the standard-setting body may ensure bitcoin remains in the fringes of regulated finance. Yet safer areas of the blockchain and crypto world are still accessible to JPMorgan (JPM.N), HSBC (HSBA.L) and others. It’s a good balance between prudence and progress.
The Switzerland-based team of bank supervisors, chaired by Spanish rate-setter Pablo Hernández de Cos, designs international standards which local watchdogs implement. Thursday’s consultation paper comes down hard on high-profile assets like bitcoin and ethereum.
The two most popular cryptocurrencies fall into the Basel Committee’s Group 2 designation, reserved for assets whose value fluctuates wildly or whose key participants could be untraceable and unregulated. That means a trading position or loan denominated in bitcoin would be subject to a 1,250% risk weighting. So, a $100 million asset would appear as $1.25 billion on the bank’s balance sheet, forcing a lender with an 8% capital ratio to hold $100 million of