The Basel Committee on Banking Supervision believes that cryptos are unsafe to rely on as a medium of exchange or store of value.
International banking authority the Basel Committee on Banking Supervision (BCBS) has issued a warning statement on crypto assets on March 13.
The BCBS is a committee of banking supervisory authorities hosted and supported by the Switzerland-based Bank for International Settlements (BIS) — an organization made up of 60 of the world’s central banks
In today’s statement, the committee warned that the robust growth of the crypto industry could potentially “raise financial stability concerns and increase risks faced by banks.” The committee noted the risks were present despite the crypto market’s currently small scale in relation to the scope of the global financial system.
The BCBS also argued that crypto assets are “unsafe to rely on” as a medium of exchange or store of value, two of the main functions of money, implying that “cryptocurrency” is a misnomer. The authority also stated that crypto assets do not represent legal tender and “are not backed by any government or public authority.”
Pointing to a large number of risks associated with the interaction between banks and crypto-related businesses, including the risk of money laundering, terrorist financing, fraud and hacking, the BCBS provided a list of minimum requirements for a bank to operate crypto-related services.
According to the committee, any bank that decides to work with crypto-related assets should first ensure it possesses relevant technical expertise to adequately evaluate the risks associated with the field. The bank should also guarantee a clear and effective risk management framework, providing regular relevant data related to the bank’s crypto-asset risk profile.
Additionally, a bank should also publicly disclose any crypto-related services along with its usual financial disclosures, as well as be compliant with local regulations.
In January, the BIS published research claiming that departing from Bitcoin’s (BTC) proof-of-work system will not solve the major problems faced by the biggest cryptocurrency.
Previously, the BIS reported that 70 percent of global central banks are exploring the benefits of central bank digital currency (CBDC) issuance, while clear implementation plans and motivations significantly vary depending on contexts.