Basel Banking Committee set to enforce strict rules on cryptocurrencies  

The Basel Committee on Banking Supervision, one of the most powerful banking standards setters in the world, released a statement saying that cryptocurrencies should be regulated with strict policies. 

In the statement, it has recognized crypto’s big potential to be a feasible solution to today’s most pressing problems faced by banks such as money laundering, hacking, credit risk, and fraud. 

With such massive potential, the Committee on Banking Supervision has highlighted the importance of implementing specific and strict guidelines to regulate digital currency. 

It also added that these policies should be stricter than those currently implemented on stocks and bonds. 

Proposal of the committee

The Committee has proposed a risk weight of 1,250%, which is considered as one of the strictest standards for banks’ exposure to assets with the high-risk percentage.

This proposal would require banks to hold capital that is equal to the exposure they plan to face. As a simple example, a $300 exposure in Bitcoin would require banks to shell out a minimum capital backing of $300.

According to the Committee, the planned standards would cover all assets that are created through NFT tokens and decentralized finance. It also made it clear that central bank digital currencies are not covered by these standards. 

Bitcoin on the rise again

Though many analysts say that the proposal for cryptocurrencies is somehow harsh, Basel Committee’s announcement has created excitement among investors. 

From the investors’ perspective, the announcement is a clear sign that cryptocurrencies are slowly but surely being taken seriously by the authorities. On top of that, it is also a clear sign that wider crypto adoption is imminent in the near future. 

The announcement has catapulted bitcoin’s value by around $2,000 on Thursday.

 

Image courtesy of Cointelegraph News/YouTube

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