During a speech earlier this week, Steven Maijoor, Executive Director of Supervision at De Nederlandsche Bank, discussed crypto-assets. While the crypto crash didn’t impact traditional finance (TradFi) it will in the future as linkages between crypto and TradFi increase. The Financial Stability Board (FSB) made recommendations for global regulations, but some jurisdictions will not fall into line. He’s particularly concerned about banks dealing with (riskier) intermediaries in non-compliant countries.
Additionally, the Basel Committee has finalized the balance sheet requirements for banks to control the extent of their crypto-asset exposure. Mr.Maijoor suggested the rules be adjusted to limit the exposure of banks to intermediaries in these high risk jurisdictions.
“What we can do, though, is require that traditional financial institutions take additional measures to manage the risks of interacting with crypto intermediaries operating in such jurisdictions,” said Mr. Maijoor. “Measures necessary to protect global financial stability. We are not there yet, but if you ask me, we should be heading in that direction.”
Maijoor’s views matter as his boss at the Dutch central bank is the Chair of the FSB.
Impact on monetary policy in emerging markets
Beyond financial stability issues triggered by fraud or crypto volatility, he also highlighted the potential impact of cryptocurrencies on emerging market economies. That’s because of the risks of currency substitution.
Hence, the FSB will explore how to enhance cooperation between advanced and developing economies to address these risks.
