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Basel committee: banks holding bitcoin must have capital to cover losses

The Basel Committee on Banking Supervision, a forum that brings together banking watchdogs from around the world -such as the Fed or the ECB- asked financial institutions to have enough reserve capital to cover losses in any event. holding of bitcoin in its entirety.

The regulator proposed this capital requirement for cryptocurrencies held by banks in its first rule to measure for the nascent sector.

The information comes from a document published on March 13, 2020 which he called: “Designing a prudential treatment for cryptocurrencies.” This document compiles information from a questionnaire that was circulated on December 13, 2019 .

The document states on page 11, under the statement : “Treatment of liquidity risk”, the following: “crypto assets would be subject to a stable financing required at 100%”.

On this working paper, the regulatory entity again opened a public consultation this June 10, 2021 and hopes that the responses on the subject will be recorded before September 10 of this year on its website .

In the press release that the Basel Committee prepared to call this presentation of proposals, divides cryptocurrencies into two major groups : those that can be treated under the existing Basel framework with some modifications, including stablecoins and tokenized financial assets, and those that have special treatment because they are considered “crypto assets with higher risk”, and Among them bitcoin.

While banks’ exposures to cryptocurrencies are currently limited, continued growth and innovation in cryptocurrencies and related services , along with increased interest from some banks, could increase global financial stability concerns and risks for the banking system in the absence of specific prudential treatment.

Committee of Basel Banking Supervision.

More and more banks want to incorporate cryptocurrency custody services, for example, the US Bank. This is the fifth largest bank in the United States and intends to add this service for its clients, as reported by CriptoNoticias.

Cryptocurrencies may become essential for the banking sector

The Basel Committee received on March 13, 2020, written comments of the interested parties. The comments, in PDF format, were published on their website.

For example, BBVA bank answered the question “What benefits do cryptocurrencies provide for the banking system and the provision of financial services in general?”

According to the aforementioned financial institution, given these potential benefits, cryptocurrencies could become essential for the banking sector . Therefore, it is important to avoid imposing an overly burdensome framework on banks’ exposures to these assets from the outset.

The Canadian Banking Association agreed with BBVA in saying that it has been identified that cryptocurrencies and their underlying technologies offer benefits to facilitate peer-to-peer interactions and promote efficiency.

Finally, the Association The Japanese Bankers (JBA) noted that high-risk cryptocurrencies should be subject to conservative prudential treatment at this juncture. The JBA acknowledges that there remains skepticism about the value of cryptocurrencies and their sustainability , in particular towards those types of cryptocurrencies that have no intrinsic value.

However, the JBA believes that such conservative treatment, including the definition of high-risk cryptocurrencies, should be provisional if it is to be incorporated into prudential standards. For this association, although the sustainability of the value of crypto assets is uncertain, it is also a fact that there is an observed value traded in the market; Therefore, the JBA says that it cannot deny that, in the future, the value of crypto assets will stabilize and sustain itself in a sustainable way.

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Sandra Loyd
Sandra is the Reporter working for World Weekly News. She loves to learn about the latest news from all around the world and share it with our readers.

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