Bitcoin is included in the highest risk category in Basel’s new bank capital plan.

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The Basel Committee on Banking Supervision recommended stringent rules for institutions that wish to keep cryptocurrencies like Bitcoin.

The Basel Council on Banking Supervision (BCBS), a worldwide committee of banking supervisors and central banks, has recommended new rules for institutions that wish to store cryptocurrencies like Bitcoin (BTC).

In a consultation paper published Thursday, the committee provided preliminary proposals for the prudential treatment of crypto exposure by banks.

The report expanded on the topics of the committee’s 2019 discussion paper as well as reactions from various stakeholders and worldwide industry heavyweights.

The BCBS assigned a risk weight of 1,250 percent to Bitcoin due to its anticipated volatility and potential for criminal usage. This effectively means that banks must hold $1 in capital for every $1 in Bitcoin exposure.

This, according to the study, would ensure that there is enough capital to absorb a full write-off of crypto-asset holdings “without exposing depositors and other senior creditors of the banks to a loss.”

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The BCBS recommended categorising crypto assets into two main categories: those suitable for treatment under the Basel Framework with certain adjustments, and those, such as Bitcoin, subject to the new conservative prudential treatment.

Source: Bank for International Settlements

Tokenized conventional assets and “crypto assets with effective stabilisation mechanisms,” i.e. stablecoins, would fall into the first group.

The second category covers Bitcoin and other assets that “fail to meet any of the classification conditions,” such as the use of a stabilising mechanism.

According to the BCBS, a high risk weight of 1,250 percent results in a “conservative outcome” for direct exposures to crypto assets. However, when it comes to crypto derivatives, the committee cautioned that “care should be taken in defining what the ‘value’ is in the formula to ensure the outcome is similarly conservative.”


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