Zoe Wyatt and Dion Seymour comment on crypto rules for banks in CityWealth

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Zoe Wyatt and Dion Seymour comment on the recent move by EU lawmakers to back stricter crypto rules for banks, in CityWealth.

Zoe and Dion’s comments were published in CityWealth, 02 February 2023.

Zoe comments: “Whilst crypto is still nascent, it’s important to protect the traditional banking system from associated turbulence, and I welcome appropriate capital requirements. As we’ve seen with FTX and other exchanges operating like banks, rehypothecating under collateralised volatile assets is not viable.”

Dion comments: “The application of Basel III was expected and is necessary to provide consumer protection and stop bank runs. However, for crypto assets this is difficult to get right – the proposed level of capitalisation may reflect the volatile nature but will be prohibitive to bank adoption. The regulations introduce a definition for shadow banking, which makes up a significant proportion of global financial trade, and falls outside the realm of traditional banking and regulation – much like crypto. However, Basel III does not require such intermediaries to have the same capitalisation requirements as suggested for the crypto-asset sector. Whilst we welcome more regulatory actors participating in this sector, in our view, there needs to be the consistency of treatment.”

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