The Basel Committee wants to limit the risk of banks' digital assets
The Basel Committee on Banking Supervision proposed during its second consultation on the prudential regime of crypto assets that banks limit their exposure to so-called Group 2 crypto assets to just 1% of their Tier 1 capital.
Group 1 digital assets consist of tokenized traditional assets, such as synthetic stocks, or assets with effective stabilization mechanisms, such as regulated stablecoins. Under the new proposal, Group 1 digital assets will be subject to at least equivalent risk-based capital requirements as traditional capital assets under current capital, Basel III.
However, cryptocurrencies that do not meet the above requirements will be classified as Group 2 digital assets, which theoretically will include the main non-stablecoin, non-tokenized cryptocurrencies such as bitcoin and most altcoins. Thus, banks will be able to allocate only 1% of their total equity or net asset value in long or short positions relative to Group 2 digital assets.
In addition, the Basel Committee is considering the possibility of banks accepting a risk premium of 1250% for Group 2 digital assets. For comparison, shares usually have a risk premium of 20% to 150% tied to their nominal values, depending on the company's credit rating. In accordance with Basel III, the bank's risk-weighted assets should not exceed 10.5% of its Tier 1 capital for reasonable leverage.
This move is likely to severely limit banks' ability to buy volatile cryptocurrencies in the future, since, for the sake of argument, the bank will have to add $125 million worth of risk-weighted assets to its portfolio for every $10 million of bitcoins purchased, making them much less profitable than assets with lower risk-weighted premiums.. Basel III is an international regulatory agreement that almost all financial institutions in developed countries must comply with and enforce the law.
https://coin-signal.com/cryptonews/the-basel-committee-wants-to-limit-the-risk-of-banks-digital-assets/
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