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- 1 The Basel Committee proposes new regulations for major banks to ensure high-level transparency and market discipline.
- 2 The global regulators proposed to disclose crypto exposures including qualitative and quantitative facts on the crypto activities.
From considering crypto as a fake currency to legalizing it, the cryptocurrency market developed a strong position in the financial system. Global regulators showing trust in digital assets and doing all essentials to generate maximum proceeds from the crypto market. With time, the count for misleading and fraudulent action enhanced in the crypto market, refining the need for regulations.
Basel Committee, a primary global standard setter for banks and prudential regulation, came up with a proposal to make the crypto market more transparent and disciplined.
The Basel Committee’s Proposal
On October 17, the Basel Committee came up with big news for the crypto universe as well as for the institutes operating in the financial sector. The committee proposed a new regulation for the major banks to disclose the crypto exposure to maintain a high level of transparency.
According to the Basel Committee, banks must reveal quantitative and qualitative facts on their crypto activities, as per the draft guidance. Increased crimes, fraudulent acts, and money laundering activities, simply raised the need for relevant regulations to make financial practices more transparent and secure.
Under the proposal, major banks working with digital assets must disclose quantitative and qualitative information on the crypto activities. The proposal adds to the heavy capital needs already imposed by the committee to discourage banks from sustaining unbacked crypto including Ether (ETH) and Bitcoin (BTC). Key crypto-linked leaders including Signature Bank and Silicon Valley Bank are mainly targeted in the plan.
In addition to this, the proposal is going to be effective in 2025, making it mandatory for the banks to reveal both the qualitative and quantitative information associated with the crypto activities. The information can include actions related to crypto assets as well as facts associated with capital and liquidity requirements.
The Future Influence
The plan was designed and exposed keeping in mind the current situation of the crypto world and future facts. Cryptocurrency mainly works with the decentralization concept and applying regulations can affect digital asset’s features. However, the common regulation format for information disclosure will be based on the practice of transparency and market discipline. The decline in information asymmetry between market participants and banks is another key benefit of the plan to the financial system.
In addition to this, the plan was first trailed by the Basel Committee two weeks ago which ensured the appropriate functioning of the same. Setting norms for traditional finance lenders was developed by the committee to mitigate a repeat of the 2008 financial disaster and is open for approval until 2024.
Not only the crypto world, but the Basel committee is prepared to improve and advance the financial system.
Conclusion
Basel Committee, a primary global standard setter for banks and prudential regulation, revealed a new regulation for the banks working with the crypto world. By 2025, it will become mandatory for banks to disclose qualitative as well as quantitative information associated with digital assets, capital, and liquidity.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
