Crypto-assets

A crypto-asset is a virtual digital form of exchange based on cryptography and peer-to-peer networking, for example Bitcoin.

More commonly known as 'cryptocurrencies'.

Regulators' response to crypto-assets

"Even though their prospects of replacing fiat money are tenuous at best, cryptocurrencies are of growing interest to policymakers, many of whom prefer to term them crypto-assets expressly because they are not true currencies."

The Future of Money, March 2018 - Mark Carney, Governor of the Bank of England, speech to the Scottish Economics Conference.

EU watchdogs could treat cryptoassets as intangibles

"EU finance regulators may find it necessary to classify cryptoassets as intangibles for prudential reasons, according to a new paper from the European Central Bank (ECB).

Published on 17 May, the paper has stemmed from a detailed and thorough investigation of novel financial products by the ECB’s Internal Crypto-Assets Task Force (ICA-TF).

In its analysis of risks and regulatory gaps, the paper points out that 'incipient, yet growing' crypto-brokerage and post-trade services for institutional investors may lead to increased exposures.

However, it says: 'Currently, the means to address these potential risks from a prudential perspective are lacking. There is no identified prudential treatment for cryptoasset exposures of financial institutions, whether direct investments, derivatives, or indirect investments.' Indeed, it stresses, clarifying the optimal accounting treatment for cryptoassets could lead to 'a more conducive environment' for the creation of such investments...

As such, the paper suggests, classifying cryptoassets as intangibles under IAS 38 would automatically mean they would be deducted prudentially. It notes: 'Accounting standard setting bodies/authorities could pursue a harmonised accounting treatment by prescribing that banks should account for cryptoassets as intangible assets. Other accounting treatments (for example, cash, FX position or commodities) would result in alternative prudential treatments under the market risk framework of the Capital Requirements Regulation that are not fully suited to capture the volatility of cryptoassets.'"

The Treasurer - News roundup online exclusive - June 2019.

Also written cryptoassets.

See also

• Altcoin
• Bitcoin
• Blockchain
• Capital Requirements Regulation
• Cryptocurrency
• Derivative instrument
• ECB
• Fiat currency
• Gold standard
• IAS 38
• Intangible assets
• Internal Crypto-Assets Task Force
• Prudential
• Ripple
• Volatility

Other links

Peer Pressure, The Treasurer, April 2014