Swiss Regulators Sends Warning To Banks On Crypto Trading
Financial regulators from Switzerland’s Financial Market Supervisory Authority (FINMA) recently planned out a law enforcement aiming at banks wanting to trade in crypto assets.
The report, which came from Swissinfo.ch, stated that the letter, coming from FINMA to accountancy organization EXPERTsuisse, made a clear and strong proclamation on how financial institutions should weight crypto assets when calculating loss-absorbing capital buffers.
“FINMA said it advises banks and securities dealers to assign a ‘flat risk weight of 800% to cover market and credit risks’ against crypto assets. That means, for instance, if the current price of bitcoin is $6,000, institutions would have to value each coin on their books at $48,000 when deciding on an adequate level of the buffer,” stated a news outlet.
According to the report, the guidance is on the high end of the range and on the level of hedge funds. This clearly means that FINMA considers crypto assets to be volatile.
More from the reports stating that FINMA has also set a crypto-trading cap at 4 percent of a bank’s total capital and that they should report to the authority if they reach that upper limit.
Although the letter provides information on how regulators want the system to be, it still hasn’t made any official rules on how the Swiss banks should with cryptocurrencies under the Basel III international banking regulations.
Sometime back in February of this year, FINMA released an official guide for initial coin offerings (ICO) after receiving a large number of inquiries on the issue.
The regulator said at the time that it would determine the applicability of regulation to crypto tokens on a case-by-case basis, taking a similar stance to the U.S. Securities and Exchange Commission in its guidance, released last July.