Basel Committee Warns Against Bitcoin Threat to Global Banking

The Basel Committee on Banking Supervision (BCBS) has warned that the growth of cryptocurrencies presents a risk for banking institutions.

The BCBS is a committee of banking supervisory authorities that was established by the central bank governors of the Group of Ten countries in 1974. It provides a forum for regular cooperation on banking supervisory matters. BCBS has its own governance arrangements, reporting lines and agendas, guided by the central bank governors of the Group of Ten countries.

The fact that a recent BCBS forum has highlighted crypto assets will come of little surprise to the cryptocurrency industry. It has long been accepted that banks are the most reluctant institutions to accept the rise in popularity of digital money. The threat to the dominance of banks as the traditional provider of financial services around the world, despite two-thirds of the planet being unbanked, is a considered argument. The recent BCBS newsletter argued:

“While the crypto-asset market remains small relative to that of the global financial system, and banks currently have [minimal] direct exposures, the committee is of the view that the continued growth of crypto-asset trading platforms and new [commercial] products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.”

The committee has said that it will continue to monitor movements in the cryptocurrency industry with a view to offering banking systems protection from what they see is the higher risk posed by exposure to cryptocurrency. The main threat perceived by banks is the loss of dominance in financial markets as the world’s banks look to cheaper and more efficient ways of fulfilling their financial needs.

The devaluation of establishment money is a feasible outcome if cryptocurrency were to become any kind of threat to the established US dollar; a somewhat unlikely outcome at this stage, but if cryptocurrency were to become completely mainstream then there would begin to be real concerns amongst some of the world’s major banking institutions.

 

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