On September 30, the Institute of International Finance, in a joint associations working group with other trades (The Global Financial Markets Association, the Futures Industry Association, the International Swaps and Derivatives Association, the International Securities Lending Association, the Bank Policy Institute, the International Capital Markets Association, and the Financial Services Forum), submitted our response to the Basel Committee on Banking Supervision’s (BCBS) second consultation on the prudential treatment of cryptoasset exposures. This broad group encompasses many sectors across the industry, offering a comprehensive, global response grounded on a broad scope of expertise to the Consultation.
The Associations’ comments aim to improve the mutual understanding of current and emerging risks of private digital assets that depend on cryptography and distributed ledger or similar technology, the role of existing processes and frameworks for regulated entities to manage such risks, and to identify balanced solutions to help in the design of a capital framework that supports enhancing financial stability while avoiding overly restrictive limits to innovation. Achieving an appropriate prudential framework, that meets the aligned objectives of our members and the regulatory community, is critical to meet customer demand and harness the benefits of DLT and similar technologies for the financial services sector.
Bringing cryptoasset activities within the regulatory perimeter, where institutions are subject to comprehensive regulation and supervision and where banks can apply their significant experience managing financial and operational risks, would be beneficial for the stability of the financial system. Enabling banks to utilize cryptography and DLT or similar technology would also allow bank customers and the broader financial sector to benefit from the advances in efficiency, transparency and speed that these innovations offer.