Nov 6 – The Swiss Financial Market Supervisory Authority FINMA has set out an advisory to banks and other financial institutions to add a risk coverage on crypto-currencies at 800 percent of current market value.
Major local news portal Swissinfo reportedly saw a copy of a confidential letter from FINMA to the Swiss Association for Audit, Tax and Fiduciary (EXPERTsuisse), which explains the watchdog agency’s stance on capital buffers for crypto assets.
The letter states that FINMA is recommending a flat risk weight of 800 percent on crypto-currencies to financial services. As stated by the letter this is “to cover market and credit risks, regardless of whether the positions are held in the banking or trading book.”
This would mean that is Bitcoin is currently being traded at $6,402 and if we calculate the risk weightage, a bank must assume a value of over $51,000 per Bitcoin. This new advisement means that banks would have to set aside massive amounts of capital in order to cover losses on crypto-currency positions.
According to Swissinfo, these standards for handling crypto-currencies, which FINMA has apparently communicated to banks, will apply until the next meeting of the Basel Committee on Banking Supervision from Nov. 26–27.