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- Banks oppose new strict regulations proposed by the Basel Committee.
- Financial institutions including JPMorgan and Deutsche Bank said that the new rule is a high-risk weight and unnecessary.
Top US and European banks are opposing strict Basel rules against banks holding crypto. The banks opposed the Basel rules, which require that they set aside a dollar in capital for each dollar of BTC that they own. The Basel Committee includes the ECB, the Federal Reserve, and many other major central banks.
In June, a group that consists of global central bankers and regulators, the Basel Committee for Banking Supervision, introduced the new rules against crypto. The proposed regulations were an attempt to stop banks from getting Bitcoin exposure. The proposal noted that the continuous exposure of banks to Bitcoin “could increase risks to global financial stability if capital requirements are not introduced.”
Banks fight against stick Basel rules against crypto
Now, JPMorgan, Deutsche Bank, and other banking giants are fighting against the proposed rule. Countering the strict Basel rules, the Global Financial Markets Association, which includes JPMorgan and Deutsche Bank, along with five other associations in the industry, published a letter on the 21st of September. Different associations including the Financial Services Forum signed the letter. Some signatories came from the Futures Industry Association, the International Swaps and Derivatives Association. Others are the Chamber of Digital Commerce, the Global Financial Markets Association, and the Institute of International Finance.
According to a report, the associations stated in the letter to the Basel Committee:
We find the proposals in the consultation to be so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto asset markets.
The Basel Committee proposal came amid the ongoing attack against cryptocurrencies globally. As crypto investors increase, some executives of central banks globally have also been uttering negative comments on Bitcoin and other crypto-assets. At the same time, several major banks are currently working on developing their own central bank digital currencies (CBDCs).
ECB president: Cryptocurrencies are not currencies
In a recent statement, the European Central Bank (ECB) president, Christine Lagarde, said cryptocurrencies are not currencies. In addition, the president praised the digital euro, attempting to convince investors to invest in digital assets instead of BTC. Regardless of all the negative comments, there is the continued adoption of Bitcoin among both retail and institutional investors. Over the past year, banks and have also shown interest in Bitcoin exposure. The report further explained that:
The committee said in June that banks should apply a 1.250% risk weight to bitcoin, which is said to be similar in effect to the deduction of the asset from the capital. If a bank holds $100 of bitcoin exposure, it would give to risk-weighted assets of $1,250, which when multiplied by the minimum capital requirement of 8% results in setting aside at least $100.
However, the letter from the banks said that such a high-risk weight for Bitcoin is not necessary.
