Risk Factor For Crypto Assets Should Be 800% — Report
The Swiss Financial Market Supervision Authority (FINMA) recommends banks and other financial institutions to take into account 800% risk when operating with cryptocurrency investments, Swissinfo reports.
According to the regulator, the amount needed to cover the risks associated with digital assets, such as bitcoin, should be eight times higher than their market price. It is stated in the FINMA’s letter to EXPERTsuisse, a Swiss tax and audit association. The regulator advises attributing this ratio to the assets, no matter where they are stored — in a bank or a trading book.
For example, according to CoinMarketCap as of November 6, the bitcoin price is $6423. Then, when weighing risks, the bank must provide an amount of more than $51,000 for each token to cover possible losses.
According to experts, 800% is the highest risk rate, which indicates considerable volatility of these assets. It means that FINMA equates cryptocurrency trading to the activities of hedge funds in terms of reliability. Also the agency believes that digital assets are not sufficiently liquid.
However, FINMA only voices approximate figures, anticipating laws and recommendations by the Basel Committee on Banking Supervision. Switzerland may get a decision on cryptocurrency regulation at the end of November 2018, when the Committee is going to meet.
Previously, the Swiss financial regulator issued the first national license, allowing to manage digital assets, to Crypto Fund AG. The company will be able to offer cryptocurrency-related services to institutional investors legally.