Britain to Formulate Capital Measures For Banks Interested in Crypto Assets

Bank of England Deputy Governor Sam Woods stated that he would front run capital measures against crypto if it comes down to it
Bank of England Deputy Governor Sam Woods stated that he would front run capital measures against crypto if it comes down to it

Bank of England, Deputy Governor Sam Woods stated on Thursday that he would spearhead the proposal of capital measures against crypto if it comes down to it. The goal is to prevent Britain’s banks from over-exposure to crypto assets without being backed by sufficient capital.

Already, the Basel Committee of banking regulators is working on setting out capital requirements for banks with crypto assets like Bitcoin. The Committee is looking to propose prohibitive charges that will discourage lenders from getting involved in the cryptocurrency sector.

Woods opined that regulators were becoming more attuned with the sector, and noted that Basel’s proposals were tenable.

Speaking to Reuters, Woods pointed out the limited exposure of banks to crypto assets. He further noted that the increased interest of individual and retail investors could no longer be avoided by banks, hence the need for the regulations.

He said, “Some of the banks have announced plans to provide ancillary services in that regard. That may be OK but as that develops and if it develops into something big, we are going to need to make sure the capital treatment is pretty robust.”

Such policies when adopted by Basel typically take years to implement in the member countries. Considering the speed of growth of the ecosystem, Woods noted that the country may go ahead to put its capital measures in place.

“We would not want to stop firms doing things that make commercial sense, but we would take a very conservative view on capital treatment, and if necessary, we would put some capital measures in place,” Woods said.

Basel’s yet-to-be Implemented Capital Measures

After the financial crisis of 2008, the Basel Committee agreed on certain capital norms. These norms aim to protect the world’s economy from a repeat of negative history. Unfortunately, the agreed capital reforms have not been implemented by member states like Britain, Europe, and the United States.

The delay in implementation was sanctioned to allow banks to focus on dealing with COVID. A new deadline was set for January 2023. Based on current progress from the countries, it looks unlikely that the deadline will be met.

None of Europe, Britain, and the United States has finalized how the agreed-upon elements will be implemented. While some EU banks want the rules eased, Woods is confident they can go ahead with implementation.

Woods said, “Our overriding approach is that we both are and seen to be a robust implementor of international standards.”