Key message: Big banks like JPMorgan Chase and Deutsche Bank are opposing new rules where they would have to set aside $1 of capital for every $1 held in cryptocurrency. The rules were proposed in June by a group of global central bankers and regulators, also known as the Basel Committee on Banking Supervision (BCBS).
Reasons for big banks
The Global Financial Markets Association this week published a letter opposing such strict capital requirements that cryptocurrencies should face. Banks further argue that such strict rules would make it impossible for them to hold cryptoassets and participate in crypto markets. It would also risk pushing cryptocurrency-related activities into the unregulated market.
In June, the Basel Committee said in a proposal that banks should apply a 1,250% risk weight to bitcoin, adding that this is essentially the same in effect as deducting the asset from capital. In reality, this means that if a bank held $1,000 in BTC, it would have $12,500 in cash.
Big banks have also objected to the inclusion of stablecoins on the grounds that they could be subject to the same requirements as cryptocurrencies. It should be added, however, that stablecoins have come under greater regulatory scrutiny, with their total market capitalization exceeding $100 billion.