Trade groups representing banks, asset managers, and the blockchain industry have collectively urged the Basel Committee on Banking Supervision to steer clear of overly cumbersome regulations that risk stifling innovation in the crypto industry.
According to the Financial Times, a letter sent by the trade groups said proposals to regulate the crypto space were “so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto asset markets.”
The letter was signed by a multitude of groups, including the Global Financial Markets Association, the Institute of International Finance, the International Swaps and Derivatives Association, the Financial Services Forum, and the Chamber of Digital Commerce.
The Basel Committee is responsible for setting the standard for the world’s approach to banking regulation. Earlier this year, Basel said that banks will have to cover their Bitcoin holdings with their own capital—in other words, setting aside enough capital to cover any losses incurred.
According to the Financial Times, the group said that such regulation did not recognize the diversity between various crypto assets. Instead, the group reportedly argued, the amount of capital reserve in place should be tied to the risk presented by each cryptocurrency.
“We think everyone will be better off if regulated banks can meaningfully participate in these markets and provide access for their customers,” Allison Parent, executive director of the Global Financial Markets Association said.
The group added that there was a “certain measure of urgency in ensuring that supervised banks can participate” in the crypto market.
Crypto and regulation
Recent months have shown that the crypto industry may well be on a collision course with regulators around the world.
Gary Gensler, chairman of the Securities and Exchange Commission (SEC) in the United States, has frequently cited the need for better consumer protection laws in the crypto industry—a view seconded by prominent senators like Senator Elizabeth Warren (D-MA).
Gensler has also said multiple crypto assets may represent unregistered securities, and that cryptocurrencies have often been used to “skirt our laws.”
Elsewhere, prominent exchanges in the industry have raised the ire of financial services regulators around the world. Binance, led by CEO Changpeng Zhao, has experienced a summer full of adverse regulatory updates from regulators in the UK, Italy, the Cayman Islands, Holland, Malaysia, Japan, Thailand, and elsewhere.