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The Basel Committee for the world’s leading central banks has proposed a maximum capital requirement for crypto exposure due to the risk of price volatility and money laundering.
Banking committee suggests prudence for crypto
The Basel Committee on Banking Supervision published a report on Thursday that deals with the risks of cryptocurrencies.
The report proposed “conservative prudential treatment” for crypto assets. The members of the Basel Committee include the US Federal Reserve, the Bank of England, the Deutsche Bundesbank and the Bank of France.
The report states that cryptocurrencies “pose global concerns and financial stability risks to the banking system without specific regulatory treatment.”
This is the second draft of the precautionary proposal put forward by the committee over the past two years.
The group divided crypto assets into two categories: one for traditional securities and fiat-backed stablecoins and another for cryptocurrencies without these assets. For the first category, the Basel Committee recommended the regular Basil framework, which also applies to traditional raw materials. The second group was labeled “high risk” and the panel urged maximum caution, including a recommended capital requirement of 1,250%.
Banks are required to provide adequate capital to cover losses from activities such as lending. The capital requirement is different for different asset classes. For example, the requirement for real estate is lower than for oil-backed securities.
While partnerships between traditional banking services and crypto businesses are currently few and far between, the Basel Committee has highlighted its concern that some banks may look into the area in the future. El Salvador’s recent move to legal tender Bitcoin and the support of other Latin American leaders speaks volumes for this rising interest.
Basel Committee has asked for comments on the matter until September 10th.
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