The Deputy Governor of the Bank of England stated that the Bank of England would bypass Basel Committee rules on capital backing for crypto assets.
On Thursday, Deputy Governor Sam Woods stated that his country would be the first to adopt global rules governing banks and crypto assets. This would prevent British banks from gaining significant exposure to crypto assets without adequate capital backing.
Woods is referring to the Basel Committee of Banking Regulators’ proposed rules. The Committee has recently begun the development of regulations that could become the industry standard for major global banks. Furthermore, these rules include disciplinary fees that may prevent lenders from participating in the crypto space.
According to these rules, major banks that hold crypto assets must have adequate capital backing in relation to the amount of crypto. The Deputy Governor described these rules as “quite sensible,” adding that banks do not have enough exposure to cryptocurrency.
“We would not want to prevent firms from doing things that make commercial sense,” Woods told Reuters. “But we would take a very conservative view on capital treatment, and if necessary, we would front run, perhaps not exactly in the same way, but we would put some capital measures in place.”
Rules Against the Rules
While Woods supports the Basel proposals, some banks disagree. Major lenders on the international financial scene sent a letter to the Committee earlier this week, expressing their opposition to the proposed rules. The Global Financial Markets Association, which includes JP Morgan and Deutsche Bank, is in opposition.
The current deadline for finalizing the rules is January 2023. However, Woods says it’s unclear if this deadline can be met because “timetables are shifting.”
This is a slight shift in tone from previous crypto-related comments from England. The Bank of England stated over the summer that cryptocurrencies “only require monitoring” and do not require any further action. The space remains in limbo as global regulators consider broad crypto regulations.