The Basel Committee, which holds regulatory status over the Banking Supervision of International Settlements of the Bank for International Settlements stated that banks should hold appropriate reserves to fully contain losses from investments in crypto.
The Basel Committee’s assertion came after the government of El Salvador voiced its willingness to use Bitcoin as a legal tender, in spite of the excessive volatility of the cryptocurrency market.
The committee introduced the rules for “weighing risks” for banks with entry to different types of assets. It was suggested to divide cryptocurrencies into two separate groups. The first one includes tokenized conventional assets and stablecoins. They must follow the same rules that apply to bonds, loans, commodities, and stocks.
The second group is regarding conventional cryptocurrencies, in that count BTC. They will be handled with a presumable “conservative approach” as their risk ratio is 1250%. This means that any bank that owns BTC or another crypto asset will be obliged to have in stock a quantity of fiat currency corresponding with its investments in virtual assets.
“In this situation, banks will have sufficient funds to cover their losses in the aftermath of a potential crash in the rate of crypto assets. This will safeguard depositors and privileged creditors from losses,” declared the Basel Committee.
