Indian Fintech Firms Calls Basel Committee's Crypto Rules Transparency-Driven, Progressive

The Basel Committee of Banking Supervision (BCBS) released a new ‘disclosure framework' directing banks to reflect their exposure to crypto assets as public records earlier this month. In conversation with Gadgets360, Indian fintech firms have said the Basel Committee's decision to pass this law is progressive and driven towards bringing more transparency to the relationship between cryptocurrencies and banks on an international level.

Indian Fintech Firms React to Basel Committee's Disclosure Framework

In conversation with Gadgets360, NeoFinity Founder and CEO Rayan Malhotra said that while it might be challenging to implement, the Basel Committee's decision promises to bring about a positive shift in international fintech industry. NeoFinity is the fintech unit of the Neo Group and provides asset management services and financial advisories to institutions.

"Banks are set to embark on a new era of transparency and accountability. They are now expected to openly disclose their trading in cryptocurrency assets. The Basel Committee's new crypto disclosure framework marks a significant step towards greater transparency and regulatory clarity in the crypto industry," Malhotra noted.

According to Malhotra, the Basel Committee's crypto asset disclosure framework will ensure that financial institutions can integrate crypto assets more securely and responsibly into their operations. In the wider picture, this could help the crypto industry see a safer scope for widespread adoption across all 45 BCBS' member countries including India, Australia, China, the EU, Germany, Italy, and Japan.

Adding to Malhotra's outlook, A2Z Crypto Co-Founder and CEO Krishnendu Chatterjee said that BCBS' crypto disclosure framework for banks will also secure the playing field for investors engaging with crypto ETFs. On an overall level, Chatterjee predicts that this development will usher-in more institutional exposure to cryptocurrency.

"Due to the nature of crypto assets, complete transparency in holding and proper disclosure will give confidence to any structured products like ETFs or yield bearing tokens which the banks might offer to the clients. It could easily be achieved by disclosing wallet addresses, in which tokens/ coins are held," Chatterjee noted.

As these assets are blockchain based, they already offer transparency and instant settlements, that hardly other Tradfi assets can provide, the A2Z Crypto CEO added.

Why the Crypto Sector Needs Banking Regulations

The crypto sector touched an all-time high of over $3 trillion back in 2021. A year later, promising crypto projects like Terra and FTX collapsed, wiping off an estimated $2 trillion. Amidst the ensuing financial turmoil, multiple crypto-related banks in the US like Silvergate also shut down.

These instances raised concerns among global banking authorities around the risks that volatile crypto assets could pose to their respective financial systems and stability. Soon after, the World Bank, the International Monetary Fund, and the Financial Stability Board began prioritising work around drafting rules to govern the crypto sector to safeguard crypto investors from similar losses.

Last year, financial regulators from around the world joined India in working towards drafting crypto rules that could work uniformly across international locations. As part of the efforts, a crypto adoption roadmap, outlining general rules like KYC details collection and reporting suspicious crypto activities, was created last year.

Other parts of the world are also exploring ways to integrate crypto with banking but under stringent safety-related guidelines. Earlier this month, the European Banking Authority (EBA) has imposed the 'travel rule' over crypto businesses, under which, all crypto firms across the EU have been mandated to maintain records of each crypto transaction processed through their platforms.