Global Regulatory Mandate: Banks' Obligation to Disclose Crypto Holdings

The Basel Committee on Banking Supervision has recently unveiled preliminary directives with the intent of bolstering transparency and accountability within financial markets.

In line with these early-stage suggestions, financial institutions will be mandated to furnish both quantitative and qualitative particulars concerning their engagements within the realm of cryptocurrencies. This directive complements the already robust capital requisites enforced by the committee. The aim is to dissuade banks from retaining cryptocurrencies like bitcoin (BTC) and ether (ETH) without sufficient collateral, particularly in the wake of recent disruptions impacting crypto-associated entities such as Signature Bank and Silicon Valley Bank.

Set to be enforced by 2025, the proposed directives stipulate that "banks would need to divulge qualitative information pertaining to their involvement with crypto assets and quantitative data regarding their exposure to crypto assets as well as the correlated capital and liquidity prerequisites," as articulated by the committee. This regulatory body is affiliated with the Bank for International Settlements, a collective of central banks headquartered in Basel, Switzerland.

The committee went on to stress:

 "A standardized disclosure format will not only foster market discipline but also serve to even the informational playing field between financial institutions and market participants."

These blueprints were initially teased by the committee a fortnight ago. The committee, entrusted with setting benchmarks for conventional financial entities in a bid to avert a recurrence of the 2008 financial crisis, has made these proposals available for public scrutiny until January 2024.

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