Basel Committee Proposes Banks Set Aside Capital to Cover Bitcoin Exposure

The committee proposed splitting crypto assets into two groups: those eligible for treatment under existing frameworks and those that are not.

Jun 10, 2021 at 10:49 a.m. UTC
Updated Sep 14, 2021 at 1:09 p.m. UTC

The world's most influential banking regulator thinks banks with bitcoin exposure should set aside capital to cover losses in full.

  • The Bank for International Settlements' Basel Committee suggested splitting crypto assets into two groups: those eligible for treatment under existing frameworks and those that are not.
  • The first category would comprise tokenized assets and stablecoins, which "with some modifications and additional guidance" would be eligible for treatment under existing rules.
  • Bitcoin and similar cryptocurrencies would fall under the latter category because "these pose additional and higher risks," according to an announcement Thursday.
  • "They would be subject to a new conservative prudential treatment," according to the proposal.
  • The committee proposed a risk weighting of 1,250% for bitcoin, ethereum and other cryptocurrencies. That would require banks to hold capital equivalent to the face value of the exposure.
  • "A $100 exposure would give rise to risk-weighted assets of $1,250, which when multiplied by the minimum capital requirement of 8% results in a minimum capital requirement of $100 (ie the same value of the original exposure, as 12.5 is reciprocal of 0.08)," the proposal said.
  • The committee is inviting responses from stakeholders, with a deadline for submission Sept. 10.
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