Proposed rules would make "bank involvement in the cryptoasset market cost-prohibitive from a capital perspective," industry associations have told regulators.
Nine banking industry associations have submitted a letter to the Basel Committee on Banking Supervision (BCBS) in response to its proposal to introduce stringent capital requirements for banks looking to hold crypto assets on their books.In June of this year, the BCBS had published a consultation paper which assigned a 1,250% risk weight to Bitcoin (BTC), meaning that banks would need to hold $1 in capital for each $1 worth of exposure they have to Bitcoin.In their letter this week, industry groups — among them, the derivatives associations ISDA and FIA, the Institute of International Finance, European markets body AFME and the Chamber of Digital Commerce — argued that the prudential framework envisaged by the BCBS would create “material impediments to regulated bank participation in cryptoasset markets.” They argued that “certain elements of the proposal make bank involvement in the cryptoasset market cost-prohibitive from a capital perspective,” adding: “This approach is especially concerning given the rapid growth of cryptoasset-related market activity with participants that fall outside the perimeter of prudential and market regulations.”To improve upon the BCBS’ proposal, the associates have argued for a more nuanced taxonomy of various crypto assets and their varying risk profiles.
