Basel Slams Cryptocurrency in General


Cryptocurrency investors look carefully at the words and the actions of regulators. Today, there’s some dour news from the horizon in the form of comments from the Basel Committee on Banking Supervision (BCBS) which has broad global authority to regulate central banks.

Today, Helen Partz at Cointelegraph reports this morning that in a just-published “warning statement,” the BCBS has called cryptocurrencies “unsafe to rely on” as currency and even suggest that calling it ‘cryptocurrency’ is not technically accurate.

Ironically, this comes as parties in the U.S. and across the world install Bitcoin ATMs and retailers begin to offer broader opportunities to purchase items with Bitcoin.

The BCBS’s further contention that crypto coins ‘do not represent legal tender’ of any particular government kind of fall on deaf ears – we knew that already, and that’s priced into the markets since the very emergence of these blockchain technologies.

Cryptocurrencies aren’t supposed to be national legal tender. They’re supposed to have broadly decentralized support, and they do. The Basel committee comments underscore the struggle going on between traditional financial media and new crypto coins.

According to the committee, any bank that decides to work with crypto-related assets should first ensure it possesses relevant technical expertise to adequately evaluate the risks associated with the field,” Partz writes. “The bank should also guarantee a clear and effective risk management framework, providing regular relevant data related to the bank’s crypto-asset risk profile. Additionally, a bank should also publicly disclose any crypto-related services along with its usual financial disclosures, as well as be compliant with local regulations.”

Indeed, it makes sense for banks to do the research and look at specific risks around cryptocurrencies. There are learning curves to working with crypto assets. But that doesn’t mean that statements like those we heard today from Basel are going to put a nail in the cryptocurrency coffin. Instead, it means that banks are probably going to invest that time and effort to work with cryptocurrency platforms so that we can have a bright new world in the future that incorporates the strengths of both traditional fiat currencies and crypto coins.

For example, across the pond in jolly Switzerland, some bankers are hard at work converging these two disparate resource systems.

“Called SEBA Crypto AG (SEBA) and based in the Crypto Valley Zug, the startup … secured … funds from domestic and foreign institutional and private investors, including BlackRiver Asset Management and Summer Capital,” wrote Wolfie Zhao at Coindesk last September.

“With the investment, SEBA said it will develop and offer traditional banking services to firms in the crypto industry and to also provide cryptocurrency trading, asset management and custody services for institutions that are interested in moving to the nascent space. SEBA is now applying for a banking and securities dealer license from the Swiss Financial Market Supervisory Authority (FINMA) before it can roll out the planned crypto banking services.”

The Swiss town of Zug is quickly emerging as a sort of “blockchain Silicon Valley” but elsewhere, similar communities may be held back by the slings and arrows of regulators such as the BCBS. Look for this tug of war to play out during 2019, which some have called “the year of blockchain.”