ISDA, along with the Global Financial Markets Association, the Futures Industry Association, the Institute of International Finance, the International Securities Lending Association, the Bank Policy Institute, the International Capital Markets Association and the Financial Services Forum, have responded to the Basel Committee on Banking Supervision’s (BCBS) second consultation on the prudential treatment of crypto-asset exposures.
The associations’ comments aim to improve the understanding of current and emerging risks of private digital assets that depend on cryptography and distributed ledger or similar technology and the role of existing processes and frameworks for regulated entities to manage such risks, and to identify balanced solutions to help 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 these objectives is critical to meet customer demand and harness the benefits of DLT and similar technologies for the financial services sector.
Bringing crypto-asset activities into the regulatory perimeter where institutions are subject to comprehensive regulation and supervision and have 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.