The largest banks in the United States and Europe oppose the new rules set by the Basel Committee for Banking Supervision. The organisation demanded that financial institutions set aside capital for every Bitcoin that they own.
Back this June, the Basel Committee for Banking Supervision stated that banks working with BTC will have to set aside cash equivalents of their crypto holdings. This is necessary to cover possible depositors’ losses.
The new rule was developed to reduce the risks associated with a high degree of cryptocurrency volatility. Bitcoin and Ethereum (ETH) were classified as high-risk assets. Under the new rules, banks must keep 1250% of their value in cash or cash equivalents. Bank representatives report that they cannot comply with these requirements, so they are forced to abandon cryptocurrency deposits, despite their growing demand.
According to the Basel Committee, digital assets should be divided into two groups: tokens that resemble securities and fully-backed stablecoins. Both groups should be financially secured by banks.
The Association of Global Financial Markets, JPMorgan Chase & Co., Deutsche Bank AG, the Financial Services Forum, the Chamber of Digital Commerce, and five other associations opposed the new rules, an official letter reports. They emphasise that Bitcoin and other popular digital assets should not be subject to such strict rules.
Regulators in many countries are concerned about the participation of cryptocurrencies in illegal money circulation and their involvement in terroristic activities. If the new rules proposed by the Basel Committee are not cancelled, banks will have to abandon digital assets, and crypto will become part of the unregulated sector of the financial system.
Bank representatives consider the innovation “excessively conservative and simplified”. They are sure that BTC and other virtual currencies do not need such support.
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The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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