The world’s largest banks, notably JP Morgan Chase and Deutsche Bank, are opposed to new Basel guidelines for bitcoin risks.
Critics of the restrictions argue that they will push cryptocurrency trading into unregulated sections of the financial landscape. The guidelines require banks that own cryptocurrencies to set aside one dollar in capital for every dollar of bitcoin held.
The Basel Committee on Banking Supervision is a committee of global central bankers and regulators based in Switzerland. The reply, though, comes from the Global Financial Markets.
Association, which includes JP Morgan and Deutsche Bank. On Tuesday, the latter issued the former a letter expressing its objection to such stringent capital requirements for bitcoin.
“We find the proposals in the consultation to be so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto asset markets,” the letter stated.
The Committee stated in June that the risk of crypto assets should be 1250 percent. The Federal Reserve and the European Central Bank are among the members of the Committee. While it does not enforce the regulations, it establishes guidelines for worldwide regulators.
Furthermore, the Committee’s restrictive definition of stablecoins almost puts them in the same category as bitcoin in terms of capital needs. Many trade organisations have joined the opposition, claiming that such a high risk category is unnecessary.
As the market capitalization of stablecoins topped $100 billion this year, officials expressed their concerns about potential hazards. Others argue that central bank digital currencies (CBDCs) are a safer alternative to stablecoins. CBDCs, on the other hand, have their own set of dangers, primarily in terms of privacy and security.
Nonetheless, most regulators emphasise the hazards associated with cryptocurrencies. Senator Elizabeth Warren of the United States maintained her scepticism about cryptocurrency. In light of systematic concerns, she advocated for “crypto police” this summer.