Leading financial services provider, JP Morgan, has called out for the need of new regulatory policies to help international banks and financial institutions to organize and handle crypto assets in a better way.
According to reports, a J.P. Morgan executive said,
“There’s a need for new rules to help banks get more certainty in handling crypto for big customers.”
Multinational investment bank, JP Morgan, stated that international banks and various financial institutions in the crypto industry are facing a kind of confusion as there aren’t really any rules on the levels of capital needed to cover such crypto related activities. Big financial service providers who wish to offer crypto related services face a major hindrance as the regulatory policies are confounding and haven’t been laid out clearly.
New Rules Have To Be Established
The astronomical traction of cryptocurrencies has sparked a necessity for a new set of guidelines to assist banks get extra certainty in dealing with crypto for clients. With big institutions like hedge funds and investment funds who are becoming increasingly interested in cryptocurrencies and are looking out to banks to act as their intermediaries, the need for a solid regulatory frame work has become a matter of immediate attention.
Debbie Toennies, head of regulatory affairs at JPMorgan Chase’s corporate and investment bank, said that large players had asked it to hedge their exposures to crypto assets. She emphasized on an urgent need for a consistent regulatory framework at the earliest. Tonnies remarked,
“The real risk to all of our economies is that if we don’t get to a solution that allows banks to engage with our clients in a hedged way, this activity will go outside the regulatory perimeter, and I am concerned about financial stability.”
Basel Committee’s Findings
The central body for the international coordination of banking regulation, Basel Committee, has suggested punitive capital charges on banks holding crypto assets, but any final rules are not expected until 2023 or later. Toennies said that JPMorgan had been talking to different jurisdictions about “interim treatment” for crypto assets while the Basel Committee completes its work.
Last year, the committee had published a consultative document on “Prudential treatment of crypto asset exposures” where it commented that the growth of crypto assets and related services have the potential to raise financial stability concerns and increase risks faced by banks. The document explained,
“Certain crypto assets have exhibited a high degree of volatility, and could present risks for banks as exposures increase, including liquidity risk, credit risk; market risk, operational risk including fraud and cyber risks.”
