The Basel Banking Supervisory Board (BCBS) has suggested that banks should prepare enough funds to fully compensate for their losses in Bitcoin holdings, a “conservative” measure that could prevent major banks from using Bitcoin on a large scale. This was reported on the 10th (local time) by YouTube.
Therefore, Switzerland-based BCBS has placed Bitcoin in the highest risk category in its bank capital offer.
[Stablecoins should be treated as general bonds]
Basel, made up of the world’s leading financial center supervisors, has proposed some rules for capital requirements for Bitcoin and other cryptocurrencies, which are now held by a larger number of banks.
The Commission believes that even if cryptocurrency assets are currently being used on a limited scale, if banks do not comply with certain capital requirements, their further growth could increase the risk to global financial stability.
Basel requires banks to treat stablecoins as loans, deposits and bonds.
In the case of cryptocurrencies, they set a risk weight of 1,250% of the assets. This means that you must have 1,250% of that asset.
[Bitcoin is in the highest risk category]
For Bitcoin and other coins not pegged to any asset (non-stablecoins), the risk weight would be 1,250% due to the ‘unique risk’ associated with Bitcoin.
Thus, banks will need to ensure that they have enough capital to cover their clients’ exposure to Bitcoin and other cryptocurrencies.
“Capital will be sufficient to fully absorb the full amortization of cryptocurrency exposure, without exposing it to losses to depositors and other senior creditors.”
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Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.