Banks should take a conservative approach to setting aside capital to cover risks from "unbacked" crypto assets on their books, the global Basel Committee of banking regulators said in proposals on Thursday which now also cover blockchain.
Cryptoassets have tumbled in value in recent weeks partly triggered by the collapse of terraUSD, a stablecoin whose value was derived by complex algorithmic processes.
As a result, regulators like the Basel Committee are worried about the potential risks to the financial system from the lightly regulated crypto sector even though it is still small relative to the size of global stock, bond and derivatives markets.
The proposals on Thursday mark Basel's second public consultation on cryptocurrencies, which would require banks to take a conservative stance when setting aside capital for crypto holdings.
The Committee's proposal said cryptoassets which are not backed by assets like traditional currencies, and stablecoins that do not have effective...
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