Regulators Have Proposed Capital Rules at Banks for Crypto Assets. Here's How It Would Work
The Basel Committee on Banking Supervision (BCBS), a global forum of central banks and regulators that essentially sets the pace for banking regulation around the world, just released a proposal for how regulators should require banks to treat crypto assets. If passed, the proposal could have far-ranging implications for how willing banks are to hold crypto assets. Let's take a look at what BCBS is proposing.
Currently, most banks don't have a ton of exposure to crypto assets, but soon enough, many banks may allow customers to buy, sell, and hold cryptocurrencies like bitcoin (CRYPTO: BTC) as demand for crypto has surged. One of the big parts of bank regulation is how much capital banks have to set aside for certain assets such as loans in order to prepare for potential losses. The main part of what BCBS is trying to do is determine an appropriate amount of capital that banks need to hold to account for potential losses they may face on crypto assets.
The first piece of BCBS's proposal is splitting different crypto assets into three different groups -- 1a, 1b, and 2 -- which will have different forms of regulation. 1a crypto assets are tokenized traditional assets, which are just like real assets such as real estate or art that are represented by digital tokens that can be issued on a blockchain network. 1b crypto assets are basically stablecoins, cryptocurrencies that are attached to another, ideally more stable asset such as the U.S. dollar or maybe a commodity like gold. Lastly, group 2 crypto assets are cryptocurrencies like bitcoin and Ethereum (CRYPTO: ETH), which have been extremely volatile.
Source Fool.com
