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Laxman Pai, Opalesque Asia: The growth in crypto assets such as Bitcoin pose a threat to banks and global financial stability, despite relatively low levels of exposure among key players, the Basel Committee on Banking Supervision (BCBS) has warned.
The consortium of global bank regulators said: "The continued growth of crypto asset trading platforms and new financial products related to crypto assets has the potential to raise financial stability concerns and increase risks faced by banks."
While crypto-assets are at times referred to as 'crypto-currencies', the Committee is of the view that such assets do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value, it said.
Crypto-assets are not legal tender, and are not backed by any government or public authority, it warned.
Crypto-assets have exhibited a high degree of volatility and are considered an immature asset class given the lack of standardisation and constant evolution.
"They present a number of risks for banks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks," the Committee poined out.
Currently, banks have very limited direct exposures to crypto-assets, the BCBS noted. Before a bank dips its toe in, the BCBS said, it needs to conduct a comprehensive analysis of all the above risks and ...................... To view our full article Click here
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