FIA joins other trade associations in industry response to second Basel consultation on cryptoassets

FIA also files a supplemental letter urging regulators not to penalise client clearing

4 October 2022

The Futures Industry Association, the Global Financial Markets Association, the Institute of International Finance, 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 have responded to the Basel Committee on Banking Supervision’s (BCBS) second consultation on the prudential treatment of crypto-assets 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 our aligned objectives is critical to meeting customer demand and harnessing the benefits of DLT and similar technologies for the financial services sector. 

Bringing cryptoasset 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 utilise 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.

Please find a link to the Executive Summary here and the associations’ full response here.

Additionally, FIA has filed a supplemental response to provide more detail about aspects of the consultation related to client clearing and urges the BCBS not to penalise this type of activity. FIA cautions that without clarification the proposed framework would undermine consensus post-crisis reforms and discourage banks from facilitating the central clearing of crypto-asset linked derivatives, thereby limiting the risk-reducing effect on cryptoasset markets that central clearing has on other derivative markets and limiting hedging opportunities for market participants.  

Please find a link to the FIA supplemental response here.

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