By Huw Jones
LONDON (Reuters) - The Basel Committee on Banking Supervision will consult on how lenders should shield themselves from crypto assets, the global banking watchdog said on Monday, as regulators turn up the heat on a growing but risky investment sector.
"The committee agreed to publish a consultation paper to seek the views of external stakeholders on the design of prudential treatment of banks' exposures to cryptoassets," the Swiss-based watchdog said in a statement.
Prudential (LON:PRU) rules force banks to assign "risk weightings" to each type of asset such as loans or derivatives, which are then added up to determine how much capital should be held.
The crypto-assets sector has grown rapidly but bitcoin has cooled from a high of $64,895.22 in mid-April to $36,005 on Monday after China began signalling a crackdown.
The committee, made up of regulators from the world's main financial centres, said it discussed crypto-assets last Friday.
"While banks' exposures to crypto assets are currently limited, the continued growth and innovation in cryptoassets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of a specified prudential treatment," it said.
The committee will publish its consultation paper this week.
HSBC, Europe's biggest bank, told Reuters last month that is had no plans to join rival lenders such as Goldman Sachs (NYSE:GS) in launching a cryptocurrency trading desk or offering the digital coins, saying they are too volatile and lack transparency.
The Bank of England has said investors should be prepared to lose all of their money if they invest in crypto assets.