Deputy Governor of the Bank of England Sam Woods said on Thursday that if necessary, he would bypass global norms to prevent British banks from amassing large exposures to crypto-assets that were not backed by sufficient capital.
The Basel Committee of banking regulators has started work on capital requirements for banks that store crypto-assets such as bitcoin, suggesting punitive levies that lenders claimed this week would make their participation in the sector unaffordable.
“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.
The cryptocurrency industry is fast expanding, but Basel can take years to approve standards that must then be applied by members like the United Kingdom, the European Union, and the United States.
“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 therefore front-run, maybe not exactly in the same way, but we would put some capital measures in place,” Woods said.
Separately, the final aspects of Basel’s tighter capital rules established in the wake of the global financial crisis over a decade ago are yet to be implemented after being postponed for a year to January 2023 to give banks time to deal with COVID. The revised deadline appears to be in jeopardy, since Europe, the United Kingdom, and the United States have yet to agree on how the last aspects would be implemented.
Woods said it was “not clear” if the January 2023 deadline will be met given that “timetables are shifting”. “There is always the question of what does it mean by first of January 2023, that you have published your rules, does it mean firms have got them into their systems? We are going to be in line with the others and there is not going to be a big delay,” he said.
Banks in the EU want some of the requirements to be relaxed, but Britain, according to Woods, will not do so.
