Basel Committee On Banking Supervision Introduces Tough Capital Requirement Norms On Banks For Holding Cryptocurrencies

Basel Committee On Banking Supervision Introduces Tough Capital Requirement Norms On Banks For Holding CryptocurrenciesA Representative Image

On Thursday, the Basel Committee on Banking Supervision expressed that the banking industry is set to encounter an increased risk against crypto assets considering its ability to be misused for money laundering, reputational challenges, and even a volatile swing in prices, eventually resulting in defaults.

Furthermore, the concerned panel has put forward a surging risk weight of 1250 per cent to a bank’s exposure to cryptocurrencies, including Bitcoin. Accordingly, banks will have to hold a dollar in capital for every dollar worth of Bitcoin based on a minimum eight per cent capital requirement.

Cases of securitized products in which banks have less information regarding their underlying exposures are examples of other assets holding such kind of high-possible risk weighting.

This proposal has been opened up for public comments and feedback ahead of materializing in the coming times. The panel has also clarified that the concerned policies are set to undergo multiple changes considering the evolving nature of the market.

Therefore, the report does not specify any particular timeframe for the agreement and subsequent implementation of these regulations mentioned above worldwide. Such proposals reportedly take years before coming into effect, but The Times of India also reports that the development confirms that the cryptocurrency market is attracting the attention of regulators.