Bitcoin is the first successful internet money based on peer-to-peer technology; whereby no central bank or authority is involved in the transaction and production of the Bitcoin currency. It was created by an anonymous individual/group under the name, Satoshi Nakamoto. The source code is available publicly as an open source project, anybody can look at it and be part of the developmental process.
The organization in charge of issuing international banking standards seeks to limit banks’ exposure to “unbacked” cryptoassets like Bitcoin.
- Basel Committee proposes 1% Bitcoin exposure limit for banks.
- Although limited, the approach is more flexible than an earlier proposal.
- The Basel Committee is a banking regulatory body of the BIS.
The Basel Committee on Banking Supervision, better known as the Basel Committee or BCBS for short, is looking to regulate the ways in which the world’s banks can interact with cryptocurrencies and has suggested an exposure limit.
The issuer of international banking standards on Thursday proposed limiting conventional banks’ exposure to digital digital technologies are these electronic tools that have the ability to generate, store or even process data. assets such as Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. to only 1% of its capital. In a consult on the treatment of digital assets, the BCBS argued that banks should have a limit on their holdings of unbacked cryptoassets to safeguard financial stability.
Established in 1975, the Basel Committee is the global organization that brings together banking supervisory authorities and is part of the Bank for International Settlements (BIS).
Bitcoin Exposure Limit
According to coverage in various news outlets, the limitation would apply to a type of digital asset that is not backed by conventional reserves or that “is not backed by conventional reserves. have no counterpart “, and therefore represent higher risk. These assets, identified as “Group 2”, would include non-tokenized cryptocurrencies such as Bitcoin and the main altcoins as well as algorithmic stable currencies.
On the other hand, “Group 1” digital assets consist of traditional tokenized assets, such as synthetic equities, or those with effective stabilization mechanisms, such as stablecoins regulated. Under the proposal, they would be subject to risk-based capital capital is most commonly defined as the large sum of money you would use to invest. requirements at least equivalent to those for traditional capital assets.
Like explains CoinDesk , The Basel Committee’s international standards require lenders to have capital buffers that can be used as a backstop in case assets such as loans deteriorate. It also prevents banks from having significant exposure to any one entity, as the fortunes of the bank could depend on the collapse of a corporation.
Limiting exposure to Bitcoin is an attempt to make the regulation of cryptocurrencies is more in line with the rules that traditional banks already follow . In its recent paper, the BCBS notes:
The large exposures rules of the Basel Framework are not designed to capture large exposures to an asset class, but to individual counterparties or groups of connected counterparties. This would imply, for example, that there are no limits on large exposures to cryptoassets where there is no counterparty, as in the case of Bitcoin. The Committee therefore proposes to introduce a new exposure limit for all Group 2 cryptoassets outside the large exposures rules.
A more flexible approach
This week’s report comes after an initial report on the consultation that was published last year and that it was even stricter.
At that time, the consultation also qualified the s unbacked cryptoassets as higher risk compared to backed cryptoassets, such as some stable currencies and tokenized real assets. However, in practice, the original proposal meant that banks would have to increase their capital reserves to comply. As he explains CoinDesk, By way of example, a bank with an exposure of USD $100 to Bitcoin had a minimum capital requirement of USD $100.
The global banking watchdog now appears to have changed its approach after coming under fire for taking a very cautious approach. The mediaCryptoNews recuerda that, at the time, la Global Financial Markets Association (GFMA) described the original BCBS proposal as “ too conservative “.
Under the new proposal, the rules are more flexible for cryptoassets where there is an equivalent liquid derivative, such as in the case of a futures a futures contract is a standardized legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. market an area or arena, online or offline, in which commercial dealings are conducted. or an exchange-traded fund ( ETF an Exchange-traded Fund, an investment fund that users trade on exchanges and trading platforms. ) This would give banks the ability to hedge their exposure.
The committee is seeking comments on the proposed new rules, with a deadline of the end of September. In the meantime, it says it is constantly monitoring the cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. market.
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Article by Hannah Estefania Perez / DiarioBitcoin
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