The committee suggested that banks must hold the same amount of capital as the risk they face in crypto, so a $ 100 exposure would result in a $ 100 capital requirement. This reflects a longstanding warning from regulators that investors – and now banks – should only hold crypto if they can afford to write off their entire investment. The rules rightly bear the risk more to the shareholders of the banks than to the depositors. Instead of regulating crypto assets themselves – which is not the Basel Committee’s gift – the banking regulators instead tried to tighten the rules for regulated lenders, who are increasingly dipping their toes in the murky water of cryptos. Right now, this means offering research or making customer trading easier, rather than banks’ own crypto trading. The proposed rules essentially act as a deterrent to helping customers trade or buy crypto, which would put the assets on banks’ balance sheets.
Central bank digital currencies, a burgeoning area of interest, will not be covered by the new requirements. Stablecoins pegged to a fiat currency would be treated more leniently, with one important caveat: banks must guarantee that the coins are fully reserved at all times. This is not an easy task considering that one of the most famous stablecoins, Tether, was accused earlier this year by the New York attorney general of lying that it was always fully backed by the US dollar (she agreed, a penalty to pay). without admitting wrongdoing). It is more likely that such checks will not pay off for banks – and that is what it is all about.
The Basel Committee has limited powers. It has done what it can in the face of inaction by governments and differing views on the crypto market, even within the same regulators. Now is the time for a more coherent policy: danger or haven, crypto will stay. It’s ironic that crypto is recognized as part of the established financial system when it was created as an anti-establishment snub. There are elements of traditional finance that can be improved and certain crypto assets can help. One such area is facilitating cross-border settlement and payment transactions. Not entirely by chance, a second and welcome announcement from Basel revealed that they would be working with the national banks of France and Switzerland on a wholesale settlement system with CBDCs.
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