All about the Basel Committee’s regulatory body and the latest on crypto regulations

  • The Basel Committee has called for banking regulation on crypto
  • FTX’s fall has raised concerns about crypto regulation globally

The group of central bank governors and supervisors overseeing the Basel Committee on Banking Supervision has called for improved financial standards. They attempt to limit banks’ exposure to crypto to manage the risk associated with this volatile commodity.

GHOS calls for sound standards

According to a report published by BloombergGHOS endorsed global supervisory standards for banks to limit their exposure to crypto. According to the set standards, crypto assets are categorized into two groups. One group fully met a set of predetermined conditions and another was for tokens that did not meet any of the conditions.

The crypto assets that met the conditions will be subject to the capital requirements laid down in the Basel Committee’s existing framework. As for the other group, a bank’s overall exposure will be limited to a maximum of 2% of Tier 1 capital, while less than 1% was the recommended exposure level.

Tiff Macklem, the governor of the Bank of Canada, believed that the standards set by GHOS will do well to reduce the risks associated with digital tokens. Governor Macklem is also chairman of the GHOS.

The Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision is an organization made up of 45 members, consisting of central banks and banking supervisors from 28 jurisdictions. It is the primary global standard setter for the supervisory regulation of banks. In addition, it provides a forum for regular cooperation on banking supervisory issues.

While the committee does not have formal authority over banks because its decisions do not have the force of law, its members work together to achieve the mandate set by it. The supervision of this committee rests with The Group of Governors and Heads of Supervision (GHOS). This group sets the general agenda and approves the committee’s statutes.

The decline in the crypto market is scaring TradFi players

The decline of FTX has had a domino effect on the crypto market. It has culminated in traditional financial institutions distancing themselves from the wider crypto industry. The exodus of accounting firms from the crypto scene is proof of the same.

Mazars and Armanino, the auditors of Binance and FTX respectively, have announced that they will no longer approach crypto firms.

The US Financial Stability Oversight Council disclosed their annual report last week. The report raised concerns about the entanglement between crypto and TradeFi. It also discussed how the imbroglio could put the wider financial infrastructure at risk.

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