New BIS Plan Would Have Banks Disclose Crypto Holdings

Banks will have to disclose cryptocurrency holdings under new plans floated Thursday, as international regulators partly blamed banking collapses on the sudden popularity of crypto.

The Basel Committee on Banking Supervision, which sets norms for lenders in traditional finance (TradFi), has already said banks should issue potentially prohibitive capital for their holdings of unbacked crypto such as bitcoin (BTC) or ether (ETH).

After a turbulent year that saw the collapse of crypto exchange FTX, as well as digitally focused lenders Signature and Silicon Valley Banks, the standard-setter now wants to see lenders reveal their exposure as it seeks to cut contagion.

A consultation paper to be published soon will propose “a set of disclosure requirements related to banks’ crypto asset exposures,” complementing existing capital requirements for digital assets that were finalized in December, the Committee said in a statement.

The Basel grouping, which includes bank supervisors from 28 global jurisdictions including the U.S., U.K. and European Union, had previously said it will monitor crypto norms and modify them if needed, but does not appear to have previously flagged the idea of separate disclosure rules.

In a report published Thursday, the Committee set out some thoughts on what it called the “most significant system-wide banking stress” since the 2008 financial crisis – with crypto in the firing line.

The sudden popularity of crypto was also badged as one of three structural trends indirectly responsible for the March TradFi turmoil, alongside the growth of non-bank financial intermediation and faster digital payment systems that let depositors withdraw quickly.

Signature Bank, the New York financial institution that shuttered on March 12, “failed to understand the risk of its association with and reliance on crypto industry deposits,” and executives didn’t acknowledge that fears over crypto instability might also encourage other customers to withdraw funds, the report said.