Basel’s draft rules make crypto too expensive for banks to trade, industry says

Nine Banking Industry Associations have submitted a letter to the Basel Committee on Banking Supervision (BCBS) asking them to respond to a proposal to introduce Capital Capital Production for banks seeking to keep crypto assets in their books.

In June of this year, BCBS published a consultation that weighed 1,250% risk on Bitcoin (BTC), meaning that banks would need to keep ড 1 capital for every $ 1 worth of exposure to Bitcoin.

In their letter this week, industry groups – including the Derivatives Association ISDA and the FIA, the International Finance Institute, the European market body AFME and the Chamber of Digital Commerce – argued that the prudent framework planned by the BCBS would “regulate the structural framework.” To do.

They argued that “certain elements of the proposal prohibit the bank’s involvement in the cryptocurrency market from a capital perspective,” adding: . “

To improve BCBS’s proposal, collaborators have argued for a more subtle classification of different crypto resources and their different risk profiles. Instead of the crude “single, uniform 1250% risk weight application”, the letter contains a detailed appendix that takes into account issues such as the existence of a binary market for liquid, some crypto assets.

Despite their numerous disagreements with the BCBS proposal letter, the associations still insisted on the need for regulatory confirmation “almost in the medium term, especially the speed of evolution and client demand for cryptocurrencies.” The letter further states that at present, the bank’s exposure to crypto remains limited but insists that the industry considers this limited exposure to be “undesirable or unsustainable” for a variety of reasons.

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These factors include the potential benefits that distributed laser technology holds for the financial services sector and the existing, significant demand for crypto-related products and services from customers. Moreover, the letter argued that the benefits of crypto resources and their underlying technology:

“When regulated banks will be available most and transparently […] Able to play a meaningful role. In particular, the public and the regulatory community will benefit from the bank’s involvement in the cryptocurrency space because of its long history of risk identification, monitoring and management in both prudent and conduct-oriented aspects.

The letter suggested that BCBS should be able to achieve the goals of the existing international prudent framework, such as Basel III, and make more use of it in implementing a framework of product agnosticism.