A consortium of global bank regulators is warning about crypto assets for the first time.
“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,” the Basel Committee said in a statement released today.
The Committee is the primary global standard setter for the prudential regulation of banks.
In the release, the group warned crypto assets 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 statement also faulted crypto assets for high volatility, lack of standardization and the fact they are constantly evolving.
Banks are being urged by the Basel Committee to make sure they have the relevant and requisite technical expertise to adequately assess the risks stemming from crypto-assets and a robust risk management framework before jumping into them.
“Banks are expected to implement risk management processes that are consistent with the high degree of risk of crypto-assets. Board and senior management should be provided with timely and relevant information related to the bank’s crypto-asset risk profile.,” the consortium stressed.
The Committee based in Basel, Switzerland also told banks around the world to publicly disclose any material crypto-asset exposures.
