The Committee cautions that crypto-assets pose a number of risks for banks, including liquidity risk; credit threat; market threat; operational risk (including fraud and cyber risks); money laundering and terrorist financing threat; and legal and reputation risks. Accordingly, the Committee anticipates that if a lender is authorised and makes the decision to obtain crypto-asset exposures or offer related services, then it must implement a raft of steps.
Furthermore, a lender is expected to publicly disclose any substance crypto-asset ailments or associated services as part of its routine financial disclosures and specify the accounting treatment for such exposures, consistent with domestic laws and regulations.
Finally, banks are expected to notify applicable supervisory authorities of planned and actual crypto-asset vulnerability or activity in a timely manner and supply assurance that they have fully assessed the permissibility of their action and the risks associated with the intended exposures and solutions, and the way in which they’ve mitigated these risks.
Moreover, banks need to have a clear and strong risk management framework that’s appropriate for the risks of its crypto-asset exposures and associated services. A risk management platform for both crypto-assets ought to be fully integrated into the overall risk management processes, including those related to anti-money laundering and combating the financing of terrorism and the evasion of sanctions, and increased fraud monitoring. Board and senior management ought to be provided with timely and appropriate information related to the bank’s crypto-asset risk profile.
First, before acquiring exposures to crypto-assets or providing related services, a lender should conduct comprehensive analyses of the related risks Banks also must be sure they have the relevant and requisite technical experience to adequately assess the dangers stemming from crypto-assets.
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Though crypto-assets continue to spark regulatory concerns, recent research commissioned by the UK Financial Conduct Authority (FCA) has demonstrated that although some injury to person cryptoasset users is potential, but didn’t imply a huge effect on broader society. The FCA quotes only 3% of customers surveyed had bought cryptoassets. Of the little sub-sample of consumers who had purchased cryptoassets, around half spent under #200.
The Committee continues to track improvements in crypto-assets, such as banks’ direct and indirect exposures to such assets. The Committee plans to describe that the prudential treatment of these exposures to suitably reflect the high level of danger of crypto-assets.