ABA Letter to BCBS re: Crypto Consultation

Basel Committee on Banking Supervision
Bank for International Settlements
CH-4002 – Basel, Switzerland

Ladies and Gentlemen:

The American Bankers Association (ABA) is pleased to respond to the consultative document (Consultation) dated June 2021, issued by the Basel Committee on Banking Supervision (BCBS) concerning prudential treatment of banks’ cryptoasset exposures. The Consultation provides a useful starting point for analysis of the regulatory issues relevant to bank cryptoasset activities. ABA believes, however, that considerable further work is required to inform this policy debate, which should be framed by three key principles:

• Market participants and supervisors should acknowledge the need for and work to develop a broad, common understanding of key features of the many existing cryptoassets, as well as the principal risks they present, as the basis for prudential treatment of these assets.
• As banks seek to serve customers who want exposure to cryptoassets, national regulatory and supervisory authorities must permit prudent innovation to accommodate those customer desires. Authorities should be careful to avoid preempting technological innovation by being overly prescriptive - technological evolution is rapid, and highly prescriptive regulation cannot be adjusted quickly enough to remain current. Inflexibility would constrict financial inclusion and other benefits of emerging technology.
• The overall stability of the global financial system will benefit from the transparency that will result by conducting a significant share of the cryptoasset market through supervised financial institutions, as opposed to being driven outside the banking system. Rational supervision and regulation that avoids overly prescriptive approaches will promote key public objectives of law enforcement, and suppression of terrorism finance and other security threats.

Numerous aspects of the Consultation bear directly on these principles. The balance of this discussion explores these aspects in more detail.

Download the comment letter to read the full text.