The Basel Committee has laid out specific guidelines for the banks all of who are planning to enter the crypto market. While stating the supposed threats that are posed by the crypto assets in the terms of financial stability, the Basel Committee has said about its expectations of the banks that are going to have the direct exposure to the Cryptocurrency industry to be well-judged in their approach. Considering the minimum requirement, the banks are required to improve their risk management and the disclosure procedure to reduce the risks, the Basel Committee recommended.
The bank exposures to the cryptocurrencies remain relatively low even though some institutions have started to provide services like the opening of the business accounts for the Cryptocurrency business as well as purchasing and selling of the digital assets for the institutional investors. Others like those in Brazil have gone the opposite way, closing accounts belonging to Cryptocurrency exchanges without any prior notice or intimation.
In the report produced by the committee, the Basel Committee accused the crypto assets that have continued to grow of posing a threat to the banks (traditional financial institution) and to the financial stability. It claimed that the cryptocurrencies are not a reliable alternative for money (fiat currency) and are not safe to rely on as a medium of exchange or store of value. Crypto assets are also highly volatile and expose the banks to risks including fraud and the terrorist financing links the committee has alleged. It detailed that the crypto assets are not a legal tender and are not backed by any government or public authority. They possess a number of risks for the banks that includes the liquidity risks and the operational risk that includes fraud and cyber risks, money laundering and terrorist financial risk. Basel Commitee has strongly discouraged in bringing crypto into the main fold financing alternative.