Global banking regulator calls for toughest capital rules for crypto

Friday 11 June 2021 09:34 CET | News

The Basel Committee on Banking Supervision has demanded for cryptocurrencies to carry the toughest bank capital rules of any asset, according to Financial Times.

Moreover, the banking regulator argues that requirements for holding Bitcoin and similar tokens should be far higher than those for conventional stocks and bonds. Banks with exposure to volatile cryptocurrencies should face stricter capital requirements to reflect the higher risks.

The Basel committee acknowledged in a report released on 10 June 2021 that ‘the growth of crypto assets and related services has the potential to raise financial stability concerns and increase risks faced by banks’. Such risks included market and credit risk, fraud, hacking, money laundering, and terrorist financing risk.

Some assets, such as stock tokens, stablecoins would fit into modified existing rules if they were fully reserved at all times, the committee said.

Others, such as Bitcoin and Ethereum, would face a new ‘conservative’ prudential regime, it recommended. The Basel committee proposed a risk weight of 1,250%, in line with the toughest standards for banks’ exposures on riskier assets. That would mean banks would in effect have to hold capital equal to the exposure they face and be prepared if the value of the asset were worthless, according to Financial Times.

The standards would apply to assets created for decentralised finance (DeFi) and non-fungible tokens (NFTs), but potential central bank digital currencies were outside the scope of the consultation, it added.

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Keywords: cryptocurrency, security token, DeFi, Bitcoin, Ethereum, compliance
Categories: Blockchain & Cryptocurrencies | Cryptocurrencies
Countries: World
This article is part of category

Blockchain & Cryptocurrencies