April 1, 2023

Banking regulator called for tough rules for cryptocurrencies

The Basel Committee is confident that banks' investments in digital assets can pose a threat to financial stability.

Banks must have sufficient reserves thatwill cover possible losses from investments in bitcoin, according to the Basel Committee on Banking Supervision. The organization, which operates under the Bank for International Settlements, develops uniform standards for regulating the banking sector in various countries.

The Basel Committee report indicates thatthe development of bank investments in cryptocurrencies can lead to threats to financial stability. This risk can be avoided if banks evaluate reserves to support such investments.

It is proposed to define two types of cryptocurrency assets:

The first is tokenized assets and stablecoins, which will be regulated in accordance with the rules applicable to bonds, loans, deposits, stocks and commodities.

Second - not tied to the underlying assetcryptocurrencies like bitcoin. A new approach will be applied to them, according to which the bank will be required to have equity capital at least corresponding to the volume of the position in Bitcoin or another cryptocurrency.

The Basel Committee noted that public consultations are likely to be required before the new rules come into effect. The organization explained this by the rapidly changing nature of cryptocurrencies.

On June 9, Bitcoin became the official paymentremedy in El Salvador. The corresponding law was adopted by the country's parliament. At the same time, the Chinese authorities are actively hindering the development of the crypto industry in the country after the Vice Premier of the State Council of the People's Republic of China Liu He called for tougher regulation of the mining and trade of cryptocurrencies at the end of May.