The Basel Committee on Banking Supervision has published a consultation to study the possibility of banks exposing themselves to cryptocurrencies, although it proposes maintaining a prudential treatment of these exposures and applying strict capital rules.
La Press release published by the Basel Committee on Banking Supervision (BCBS), a global organization for bank solvency chaired by Pablo Hernandez de Kos, Governor of the Bank of Spain, indicates that banks will have the green light to expose themselves to cryptocurrencies and begin trading with this new class of digital assets, although he plans to do so with a fairly prudent and conservative treatment, imposing tough capital rules that may discourage the initial ideas of banks.
In its public consultation document, the BCBS offers a risk weighting of 1.250% for Bitcoin, considered a highly volatile and risky digital asset that merits “a new conservative prudential treatment.” The risk weighting proposed by the BCBS in its document is the highest that exists and will force banks that want to trade with the cryptocurrency to maintain a reserve of fiat money of the same value as the crypto holdings. Thus, for every dollar in BTC, banks must have 1 dollar in reserve.
The Committee also plans to classify cryptocurrencies and other digital assets into two broad categories to decide whether they will be subject to the existing Basel regulatory framework, implementing only some modifications, or whether they will accompany Bitcoin in the more prudential regulatory framework.
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Cryptocurrencies and banks
The proposal presented by the Basel Committee on Banking Supervision responds to the boom and growth that cryptocurrencies and digital assets have had in society in recent years, and which has sparked the interest of organizations and regulators around the world seeking to control potential risks.
BCBS notes that although the market capitalization of cryptocurrencies remains small compared to the global financial system, the estimated value of some of the most popular and important assets in the industry has recently reached new all-time highs. This growth has sparked a frenzy among investors, who want to be part of this development and are increasingly demanding that their banking and financial institutions offer new innovative products based on cryptocurrencies.
This rapid growth is leading the Basel Committee to pay closer attention to the cryptocurrency market, in order to ensure consumer protection, prevent illicit activities and control environmental damage, one of the hottest topics in the crypto industry today.
Public consultation and Bitcoin price
Although the BCBS proposal is currently being debated in a public consultation, the possibility that the organization would allow banks to trade in Bitcoin and other cryptocurrencies had a positive effect on the value of BTC, which rebounded to around $39.000 per unit after the press release was published.
Bitcoin had fallen to $30.000 when the US government hinted that it had “hacked” one of the hacker group's wallets DarkSide, involved in the cyber attack on the US oil pipeline company Colonial pipeline. However, the price of the cryptocurrency has been recovering in recent hours with the favorable announcements of El Salvador, the first country to adopt Bitcoin as its legal tender, declaring itself 100% Bitcoin territory, and with the recent publications of the BCBS and the Texas Department of Banking.
Texas allows banks to custody bitcoins
This Thursday, the Texas Department of Banking published a release reporting that commercial banks are authorized to offer storage and custody services for cryptocurrencies on behalf of their clients. The financial regulator states that banks incorporated in the state of Texas can provide their clients with custody services for cryptocurrencies and digital assets, provided that they comply with current legislation and have adequate protocols to minimize exposure risks.
The department said bank customers have long been asking their banks to provide secure and reliable storage for crypto assets.
At the time of this edition, the largest cryptocurrency in the ecosystem is trading at a value of $36.800 per unit and maintains a market capitalization of over $680.000 billion, while the total value of cryptocurrencies exceeds $1,57 trillion.
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