A study by the Basel Committee on Banking Supervision (BCBS) suggests that the world’s largest banks are exposed to around €9.4 billion ($9 billion) worth of crypto assets. International standard-setters are considering new rules for capital that lenders must hold for creative assets.
According to BCBS’s official website,
“Following its consultation last year, the Basel Committee on Banking Supervision has launched a second consultation on bank prudential requirements for exposures to crypto-assets. “
Customer service related to Bitcoin (BTC) and Ether (ETH) accounted for 0.14% of the total exposure for the 19 banks that submitted data. The data is significant enough to something impact or affect politics.
The site further states,
“The Basel Committee intends to publish final standards before the year-end; standards may be stricter than those presented in this consultation if feedback indicates any deficiencies.”
According to Corrias, national regulators set safety standards for banks to avoid a 2008-style financial crisis. This has set strict temporary rules governing how banks enter cryptocurrencies. This is in reference to the two documents that set the rules.
The rules impose strict capital requirements on unbacked currencies such as Bitcoin and Ethereum. This also applies to algorithmic stablecoins. Planned regulations may restrict lending, reducing banks’ incentives to enter these markets. Stricter rules apply to hedged engagements and other asset-locked stablecoins.
The study suggests that most of the exposure was in Bitcoin and Ether. Others include products based on these two currencies. The number is dominated by the services banks provide to other banks. These services include custody, clearing, and market making. Only a handful of banks are involved in directly holding or lending cryptocurrencies.
However, Corrias warns that the results may not offer accurate outcomes. This is because few banks responded. Another reason is that assets are concentrated in some of these institutions.
According to Corian,
“Although useful for broadly demonstrating a bank’s crypto activity, it should be interpreted cautiously.”
Reimagining Money In The Age Of Crypto And Central Bank Digital Currency
The recent drop in cryptocurrencies has left investors in doubt. The future of money is still digital. The question is what it looks like. In the latest issue of Finance & Development, some of the world’s leading experts attempt to answer this complex political question.
Digital money has been evolving for some time. New technologies are hoping to democratize finance. The aim is to expand access to financial products and services. The main goal is to enable cheaper domestic and cross-border payments. For people in developing countries, the potential benefits are particularly significant.
Not all forms of digital money can prove profitable. Bitcoin is almost 70% below its November peak. According to Rabbi Menon, other crypto assets are not working as money. The price is decoupled from the underlying economic value. Stablecoins are designed to contain volatility. They may have proven far from stable and rely on the quality of reserve assets backing them.
Michael Casey argues that decentralized finance and cryptocurrencies cannot take hold. They also cannot address real-world problems like the energy crisis.
Regulation is an essential factor. The regulatory structure is woven, and patterns are expected to emerge. The longer this takes, the more national authorities will be bound by different regulatory frameworks. They want globally coordinated regulation to bring order to markets. This strengthens consumer confidence and creates a safe space for innovation.