Banks will face the toughest capital requirements for holdings in Bitcoin and other cryptoassets under global regulators’ plans to ward off threats to financial stability from the volatile market.
The Basel Committee on Banking Supervision said on Thursday that the banking industry faces increased risks from cryptoassets because of the potential for money laundering, reputational challenges and wild swings in prices that could lead to defaults.
The panel proposed that a 1,250% risk weight be applied to a bank’s exposure to Bitcoin and certain other cryptocurrencies. In practice, that means a bank may need to hold a dollar in capital for each dollar worth of Bitcoin, based on an 8% minimum capital requirement. Other assets with this highest-possible risk weighting include securitized products where banks have insufficient information about underlying exposures.