[IMPACT]

The Basel Committee on Banking Supervision (BCBS) is the organisation that issues banking standards to 45 jurisdictions, including the entire G20 – other countries globally, especially in Africa that are not Basel members still look to these standards to guide their own rulemaking. Member countries adhere to these regulatory standards, however governments can implement legislation that goes beyond these standards.

In June 2021, the BCBS published a paper for comment titled “Prudential Treatment for Crypto Asset Exposures” – the proposal around how regulators in the member jurisdictions should handle crypto assets from a capital and risk governance standpoint. The proposed treatment would make the adoption of crypto asset usage prohibitive for banks around the world, and likely to deter them from supporting crypto asset usage.

Bodies that submitted comment on this document include Coinbase, Ripple Labs, and banks around the world. BCBS took this feedback and will issue an updated paper in mid-2022, with another request for consultation. Once finalised, these proposals will become the minimum banking standard for all members, which then become actual legislation.

Our team, which includes members experienced in banking regulations and providing feedback to Basel, will perform the following:

o Review all previous published comments relating to the first issuance and prepare the framework for a new response

o Analyse the updated paper when released, prepare feedback (based on document review and interviews with related financial industry subject matter experts (such as specialists on payments, cross-border transactions, banking IT professionals, risk managers, etc.), then submit to Basel for review

o Make this comment publicly available so that other organisations can review and potentially use as a base for their own submission

Again, the BCBS’s proposed standard covers 45 members from 28 jurisdictions including Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom, South Africa, and the United States.

Secondly, our team has direct connection with Business Unity South Africa (BUSA) – the principle representative of business in South Africa. BUSA is a confederation of business organisations, corporate representative organisations, chambers of commerce & industry, and professional organisations. One of its tasks is to consolidate the input of various policy development processes.

Our second solution involves the production of two reports to be submitted to BUSA for their member’s consideration. A significant business presence in South Africa, BUSA can approach government with concerns that may arise from the new Basel paper, and to help address the five other pieces of legislation that are currently roadmapped pertaining to crypto assets

Basel guides the banking regulations that directly affects the laws in more than 28 jurisdictions around the world. Individual governments can add additional legislation beyond this, but making positive changes to the initial regulations make the base regulations around crypto assets less prohibitive on a global basis.

Locally, the provision of information to BUSA can encourage their direction response to government regarding five existing legislative instruments.

Time: to review the previous paper and comments, then interview subject matter experts on the potential impact of the regulations, then synthesise a submission for comment takes time – the window for comment is anywhere from four weeks to three months. The time period may be shorter as this is not the first iteration of the paper.

Expense: as the time frame may be short, the cost of adding more resources to achieve the creation of the paper comment, and the subsequent review documents for BUSA.

BCBS: there is a possibility that Basel does not take our comments on board.

[FEASIBILITY]

May 2022: review of first Basel paper and all published commentary (4 weeks)

May 2022: Prefatory interviews with 5 subject matter experts prior to new paper release (2 – 3 weeks)

Mid-2022: New Basel paper review (3 – 4 weeks)

Mid-2022: Post paper interviews with 10 – 15 subject matter experts (3 – 4 weeks)

Minimum 8 weeks from paper release (max 12 weeks): prepare response commentary. Publish commentary for the community to review and utilise.

12 weeks from paper release: deliver information pack to BUSA around the updated Basel paper, current legislation issues

Post 12 weeks: ongoing consultation with BUSA

The amount requested is 32,500 (USD to ZAR exchanged at 15.5 to 1)

• Initial Basel proposal and commentary review: 10,000 (ZAR 155,000)
• Interview relevant subject matter experts: 7,500 (ZAR 116,250)
• Review of updated commentary: 10,000 (ZAR 155,000)
• Preparation of new commentary and publish to community for template: 10,000 (ZAR 155,000)
• Sundry items (e.g. printing): 2,500 (ZAR 28,750)
• Continued engagement with BUSA (1 yr): 7,500 (ZAR 116,250)

Legal, Comms, and PR Specialist: Sade Lekena (https://www.linkedin.com/in/sade-lekena-bb090524/). Specialises in contract and PR law and legal compliance, will engage with BUSA

Director of Business Development: Les Allen (https://www.linkedin.com/in/les-allen-2659b91/). Interviewing relevant subject matter experts

Banking and Regulatory Specialist: Jeanette de Beer (https://www.linkedin.com/in/jeanette-de-beer-a6b7806/). Team advisory on banking and repayment regulations and procedures nationally and internationally. Has previous experience providing commentary on Basel proposals for a large South African bank

Support admin staff will be included on a temporary basis.

[AUDITABILITY]

Progress Milestones:

• A completed summation of issues in the first Basel paper, with reference to important commentary points

• Transcripts of identified issues from first round of interviews

• A completed summation of issues in the second Basel paper

• Review document of current legislative vehicles in front of the South African government

Primary: affect change (if necessary) to the proposed BCBS regulations

Secondary: Have BUSA successfully adopt suggested policy view points relating to current crypto asset legislation before the South African government

Tertiary: create an effective comment response for the community to utilise

While this is an entirely new project, we would expect to continue working with BUSA and would submit proposals for funding in future phases.