METI Advisory AG was pleased to offer to the BCBS comments on the captioned consultative paper. Key message: The BCBS sticks to the idea of applying the one-size-fits-all, harshest possible capital charge to the exposure to all cryptoassets other than tokenised traditional financial assets and non-algorithmic stablecoins. METI Advisory AG notes that that from a risk viewpoint, such an approach assimilates diverse cryptoassets such as bitcoin, ether, utility tokens, DeFi tokens, and other network coins, as well as algorithmic and crypto-backed stablecoins, to a single asset, akin to the worst externally rated traditional securitisation tranches. METI Advisory AG firmly believes that the assimilation of diverse cryptoassets to a single asset evidences i) a poor understanding of the natures of these diverse cryptoassets and ii) a lack of progress, compared to the discussion paper issued in 2019, in the analysis and understanding of what constitutes the most genuine asset addition since the emergence of blockchain-based finance. This position cannot be the final one and needs to be further elaborated. Bitcoin, ether, utility tokens, DeFi tokens, and other network coins, as well as algorithmic and crypto-based stablecoins differ widely in terms of their economic functions, risk profiles, and governance arrangements, and these differences need to be understood, acknowledged and taken into account when specifying capital adequacy and risk management prudential rules. The operational risk associated with these assets is bound to reduce over time as the framework ecosystem becomes more professional and possibly regulated (e.g., regarding cryptoexchanges). METI Advisory AG is strongly convinced that to achieve a more detailed and realistic understanding, it is important that the BCBS includes in the process the know-how of the cryptoindustry, which typically resides outside the scopes of BCBS-regulated entities. The full position will be made publicly available by the BCBS ind due course.
Comments on BCBS consultative paper ‘Prudential treatment of cryptoasset exposures’ (September 2021)