A confidential letter from the Swiss Financial Markets Supervisory Authority makes it clear that, in its view, cryptocurrency, such as Bitcoin (BTC), are the highest risk category of digital assets. This was reported by the Swiss news portal SwissInfo.ch, which had access to the document.
The report indicates that Swiss Financial Markets Supervisory Authority sent the letter to the association EXPERT-Suisse, which brings together Swiss auditors, trustees, and accountants. In the report, dated October 15th, the regulator issues an opinion in the face of growing consultations by banks and securities traders on the calculation of the short-term liquidity rate in the case of cryptocurrency.
The institution advises banks and other financial actors to adopt the upper limit in the risk weighting range for the management of cryptos, and, in this regard, pointed out that the banks should “assign a flat risk weighting of 800% to cover market and credit risks, regardless of whether the positions are maintained in the bank or in the trade book.”
Swiss Financial Markets Supervisory Authority Recommends Measuring Crypto Risk By 8 Times Its Value
On the other hand, the Swiss Financial Markets Supervisory Authority indicated that the activities of crypto trading should not exceed 4% of the total capital of a financial entity. In addition to that, it considers that banks should notify the supervisory body when startups reach this limit.
Swiss Financial Markets Supervisory Authority pointed out that it has not yet established an official position on how to merge the cryptocurrency market with the Basel III capital requirements or liquidity indices. The Authority highlighted that it designed the guidelines contained in the document after consulting the Swiss financial sector, including the Swiss Bankers Association (SBA).
The Swiss Bitcoin Association pointed out that there are important developments there that will favour the development of such digital assets, despite restrictions on the recommended percentage of capital that financial institutions can devote to trading in crypto currencies. It is very encouraging that banks are no longer rejecting requests from clients for financial services involving cryptocurrencies. This is the first step of Swiss finance system to jump into the future where assets will not be a centralized custody point but in the blockchain.