Banks transacting on permissionless blockchains face a number of dangers together with settlement finality, the Financial institution for Worldwide Settlements mentioned in a working paper.
The paper additionally mentioned know-how to deal with a number of the dangers, significantly privateness, is being developed. naming zero-knowledge proofs as a possible answer.
Banks that transact on permissionless blockchains face a number of dangers, together with cash laundering and terrorism financing, the Basel Committee on Banking Supervision concluded in a brand new paper.
The committee is a part of the Financial institution for Worldwide Settlements (BIS), the first world commonplace setter for prudential banks.
Different dangers embrace operations and safety, governance, authorized, settlement finality and compliance, the paper mentioned.
“Sure dangers stem from the blockchains’ reliance on unknown third events, which makes it troublesome for banks to conduct due diligence and oversight. These dangers require new danger administration methods and safeguards. Present practices for mitigating these dangers stay in numerous levels of growth and haven’t been examined beneath stress,” in accordance with the paper.
Banks are additionally uncovered to political uncertainty as a brand new laws might “change validator behaviour,” making the “blockchains themselves operationally unstable.” A ban as an illustration might “cut back the quantity of computing energy or staked native tokens obtainable to safe the blockchain, quickly rising the danger of a 51% assault,” by which ”a coordinated effort is put ahead to manage better than 50% of the validation nodes.”
The paper additionally mentioned know-how to deal with a number of the dangers, significantly privateness, is being developed, naming zero-knowledge proofs as a possible answer.
Final month, the committee accepted a disclosure framework for banks’ publicity to crypto that have to be applied by the beginning of 2026.
Learn Extra: World Banking Normal Setter Approves Disclosure Framework for Crypto Exposures
