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FINMA, crypto enters the banking world
FINMA, crypto enters the banking world
Crypto

FINMA, crypto enters the banking world

By Fabio Lugano - 6 Nov 2018

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In a letter to the Swiss credit institutions, the FINMA, the supervisory body of banks and the stock exchange, has given some indication on the weight that cryptocurrencies can have in the banking balance sheet, giving guidelines on how to evaluate them with the so-called Risk Weighted Asset (RWA).

According to the Basel II and III directives issued by the International Bank of Regulations, each banking asset must be considered for its risk.

The riskier it is, the heavier the asset item is considered to be on the balance sheet of the banks and therefore will have to be more compensated by the share capital.

Having a high multiplier dissuades a credit institution from owning that specific asset class because they would have to cover the risk with their own capital.

FINMA’s decision is therefore of twofold importance: on the one hand, a bank is expected to be able to legitimately possess cryptocurrencies and prepare the accounting framework; on the other, the controlling institution tries to discourage their possession, unless there is a high level of capital.

In the letter from the FINMA, the Swiss institution also pointed out the possibility for banks to carry out crypto trading activities, indicating that this cannot exceed 4% of the assets, a limit that obviously refers to the “on book” movements of the institutions, and not to those of the clients themselves.

Fabio Lugano
Fabio Lugano

Graduated with honors from Bocconi University, Fabio is a consultant for companies and wounded shareholders of the Banche Venete. He is also the author of "Scenari Economici", and lecturer and analyst of cryptocurrencies since 2016.

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