Key facts:
BIS insists that cryptocurrencies can threaten the financial system, but it paved the way for them.
The BIS acknowledges the exponential growth of the cryptocurrency market.
The Bank for International Settlements (BIS) paved the way for digital assets like bitcoin (BTC) within the financial system and proposed that banks hold at least 1% of their reserves in BTC and other cryptocurrencies.
In a advisory document published today, Thursday, June 30, by the Basel Committee on Banking Supervision (BCBS), the representatives of the entity of the fiat system recommend banks limit their exposure to assets like bitcoin, that is, volatile and with the capacity to destabilize the financial system.
According to the Committee, the growth of cryptocurrencies and related services has been such, in recent years, that they have shown the potential to raise “financial stability concerns and increase the risks faced by banks”.
There are “certain crypto assets that have exhibited a high degree of volatility and could present risks to banks as exposures increase,” the entity indicates in indirect reference to bitcoin.
That is why they promote banks leave their Tier 1 capital exposure to these assets at 1%. This refers to the reserves that all banks must hold. In addition, it applies to direct holdings (cash and derivatives) and indirect holdings (through investment funds, such as ETFs). According to this Committee, it would be a “new limit” of exposure for cryptocurrencies that do not meet the “conditions” of the BIS .
This exhibit would be reviewed periodically. and also a limit would be applied to cryptocurrencies such as bitcoin«on gross exposures without compensation or recognition».
The Basel Committee launched, in addition to the proposal, an alert. They explain that banks that choose to expose themselves to cryptocurrencies such as bitcoin they must not breach the limit, but rather “have agreements in place to ensure compliance with the limit”.
The Basel Committee’s proposal is seen as a minor twist on the Bank for International Settlements’ traditional stance on cryptocurrencies and the new economy. In fact, the proposal is known a few days after the BIS said in a report that bitcoin “cannot support the world financial system”, as reported by CriptoNoticias.