Consortium for Banking Regulations Issues Warning About Crypto Being Disruptive To Banking

Today, a consortium of bank regulators from across the globe, called th Basel Committee, issued a statement with the warning that cryptocurrency as a sector could potentially have a rather disruptive impact on the financial sector as a whole. The Committee, which acts as the watchdog for bank regulations and sets usual standards for the same, expressed concerns that the face of the finance sector might undergo substantial changes as a result of the crypto wave.

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A certain section of their release read as follows:

“The continued growth of crypto asset trading platforms and new financial products related to crypto assets has the potential to raise financial stability concerns and increase risks faced by banks.”

As per the release, the group believes that the onslaught of cryptocurrencies can put the existing banks under severe threat for several reasons. The release lists these risk factors and it is revealed that the rising crypto adoption could pose a threat to operational risk of banks, their liquidity as well as their credit market.

The release also raises concerns about how the rise of cryptocurrencies will potentially heighten the possibilities of money laundering and fuel the financing of terrorists. The report also focused on the high volatility that plagues the crypto market as a whole and has been making more and more headlines of late.

Instead of focusing on the positives of the crypto sector, however, it seems that the Basel report was unduly and disproportionately focused on its risks and failings, seeing it as a negative disruption to the world of banking.

The consortium gave the following advice to banks to deal with the threats:

“Banks are expected to implement risk management processes that are consistent with the high degree of risk of crypto-assets. Board and senior management should be provided with timely and relevant information related to the bank’s crypto-asset risk profile.”

Crypto asset exposure risks should also be disclosed by these banks, as per the release. Clearly, the rise of crypto is triggering a sense of loss in the banking sector.