Swiss Regulator Releases Guideline For Banking Sector Involvement In Cryptos
Cryptocurrency regulations have been a major issue in the industry. Some countries are coming up with regulations while others have remained ambiguous or aloof.
FINMA Lays Out Tough Laws For Banks
Switzerland's regulator has issued tough guidelines for banks wishing to get involved in cryptocurrencies. In a confidential letter published by Swissinfo.ch, the regulator, FINMA reached out to EXPERTsuisse with orders on how financial institutions should handle digital assets by coming up with capital buffers that are more absorbent.
FINMA urged banks and other securities institutions to allocate a flat risk value of 800% to cover market risks and the risks against these cryptocurrencies. For example, in the case of bitcoin being valued at $6,000 banks will be required to price each coin on their records at $48,000 when calculating the relevant buffer.
The letter further states that FINMA classifies cryptocurrencies as highly volatile assets. A review of the guidelines says they are considered to be on the same level of hedge funds.
The report adds that the regulator intends to cap trading in cryptos at 4% of the financial institutions total capital. All banks will be required to notify the authority in case the higher limit is breached.
Additionally, the letter provides a guideline on FINMA’s stance and outreach on the matter. However, the bank has not unveiled formal laws on how Swiss banks should handle cryptos under the Basel III international banking laws.
Early this year, FINMA provided formal regulation for ICOs after queries were submitted on the issue.
According to FINMA, it will come up with the applicable laws to digital tokens on a case by case basis. This is a similar model used by the Securities Exchange Commission in the US.