Global banking regulators, JPMorgan, Deutsche Bank and other banking giants oppose the need to keep one dollar in capital for every dollar of BTC owned by them, three months after proposing stricter new rules for traditional cryptocurrencies seeking bitcoin exposure.
The Basel Committee on Banking Oversight, a group of regulators of the world’s most prominent financial centers, proposed tougher rules in June. However, the Global Financial Markets Association, a forum of banks that includes JPMorgan and Deutsche Bank, released a letter on Tuesday with five other industry associations pushing against the new rules, The Wall Street Journal Report
“We consider the proposals in the consultation to be so conservative and simple that they will prevent banks from engaging in the crypto asset market,” the report said.
The committee’s proposed regulations have demonstrated regulators’ efforts to prevent or at least frustrate banking institutions from actually getting bitcoin exposure. Although bank exposure to Bitcoin is currently limited, the Swiss-based committee said in June, “their continued growth could increase the risk of global financial stability if capital requirements are not introduced.” Reuters Report
The proposal comes amid a strong push from developing countries against Bitcoin and cryptocurrencies. The central banks of the major economies around the world were clearly negative about such resources when designing their own.
Christine Lagarde, head of the European Central Bank (ECB), recently hit the spotlight with bitcoin and “not a cryptocurrency, but a complete stop”. The ECB chief later praised his own central bank’s digital currency (CBDC) for driving investors away from bitcoin and into its soon-to-be-developed digitalized euro.
Markets, however, are not buying such details. In addition to retail investors, institutional investors, corporations and banks have also shown increased appetite for bitcoin exposure in the past year. As the monetary policy of the global central bank reduces the purchasing power of their currency holders, investors are attracted to solid assets.
In their recent protests, the largest banks in the United States and Europe have backed down from regulatory scrutiny, which, in their view, would be a response. The Basel Committee, which includes the Federal Reserve, the ECB and other major central banks, does not technically enforce the rules itself but sets minimum standards by which regulators around the world are expected to comply.
The committee said in June that banks should apply a 1,250% risk weight to Bitcoin, which it said was “similar to cutting assets from capital”. WSJ The report “If a bank has $ 100 bitcoin exposure, it will give rise to a risky asset of 1, 1,250, which can be withdrawn by at least $ 100 if multiplied by the minimum capital requirement of 8%.”
In response, the Financial Services Forum, the Futures Industry Association, the Institute of International Finance, the International Swaps and Derivatives Association, the Chamber of Digital Commerce and the Global Financial Markets Association have been named.