Basel Committee Proposes Banks Set Aside Capital to Cover Bitcoin Exposure

10 June 2021

The world’s most influential banking regulator thinks banks with bitcoin exposure should set aside capital to cover losses in full.

  • The Bank for International Settlements' Basel Committee suggested splitting crypto assets into two groups: those eligible for treatment under existing frameworks and those that are not.
  • The first category would comprise tokenized assets and stablecoins, which "with some modifications and additional guidance" would be eligible for treatment under existing rules.
  • Bitcoin and similar cryptocurrencies would fall under the latter category because "these pose additional and higher risks," according to an announcement Thursday.
  • "They would be subject to a new conservative prudential treatment," according to the proposal.
  • The committee proposed a risk weighting of 1,250% for bitcoin, ethereum and other cryptocurrencies. That would require banks to hold capital equivalent to the face value of the exposure.
  • "A $100 exposure would give rise to risk-weighted assets of $1,250, which when multiplied by the minimum capital requirement of 8% results in a minimum capital requirement of $100 (ie the same value of the original exposure, as 12.5 is reciprocal of 0.08)," the proposal said.
  • The committee is inviting responses from stakeholders, with a deadline for submission Sept. 10.
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