Bitcoin capital rules to be set at toughest level under new proposals

Banks holding Bitcoin could be forced to set aside enough capital to cover any losses in full under new rules proposed by a collective of the world’s banking regulators. On Thursday, the Basel Committee on Banking Supervision, made up of regulators from across the global financial sector, said that continued growth in cryptoassets and related services coupled with heightened interest of some banks “could increase global financial stability concerns and risks to the banking system”. READ: Crypto regulation should not be too strict, says SEC commissioner As a result, the Committee proposed dividing cryptoassets into two broad groups. The first, Group One, includes certain tokenised traditional assets and stablecoins, cryptos which have their values pegged to other assets such as the US dollar, and will be covered by existing rules that govern assets such as loans, deposits, equities, commodities and bonds. The second, Group Two, will cover cryptoassets that do not fulfil the existing framework requirements, such as Bitcoin, and as such pose “additional and higher risks” and will be subject to “a new conservative prudential treatment”. This means that a bank holding crypto assets under Group Two will need to hold capital at least equal to the value of their exposure to the assets. The Basel Committee’s announcement comes amid the rising prominence of Bitcoin and other digital currencies in the global financial system, as well as a growing appetite for investment among institutions. However, acceptance of crypto is not uniform among the world’s banks, with Goldman Sachs Group Inc (LON:GS) having opened a crypto trading desk in March while HSBC Holdings PLC (LON:HSBA) has said it will not invest due to concerns over volatility.