'Banks should treat crypto as high risk', Swiss FINMA says

05 Nov, 2018
by Joeri Cant
'Banks should treat crypto as high risk',  Swiss FINMA says

According to Swissinfo.ch, Switzerland's Financial Market Supervisory Authority is telling its banks to treat cryptocurrency as 'high risk' and is advising financial players that crypto assets should be assigned a flat risk weight of 800% to cover market and credit risks.

Assigning a flat risk weight of 800% means that banks must put aside a larger amount of capital to cover potential losses of cryptocurrency positions than most other assets.

At the current trading price of $6,411 per Bitcoin, a Swiss bank must now assume a value of around $50,000 for every bitcoin on its books when calculating the risk-weighted worth of its assets.

FINMA points out in its report that other countries are taking an even tougher line with risk weighting cryptocurrencies.

SEBA Bank, which is one of the many crypto banks setting up shop in Switzerland, said that they acknowledge the guidelines by FINMA which may be justified for certain models on how crypto assets are handled and held.

However, CEO od SEBA Bank said, that they 'believe that the guidelines have a limited impact on SEBA's business model'.

Bitcoin Association Switzerland reacted positively to the findings.

'It’s encouraging to see banks no longer turning down the increasing number of client requests for crypto services but asking for guidance and providing their input along the way'

'This is the Swiss financial centre’s first step towards moving into the next decade where assets are no longer held in a single, central custody but instead are held on the blockchain', they said.

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