Banks in the European Union need to start limiting bitcoin holdings before global norms established by the Basel Committee on Banking Supervision, (BCBS) take effect. Supervisors at the European Central Bank stated Wednesday.
Although crypto has yet to make significant inroads into the bloc’s banks, the ECB advised that they treat the assets as potentially dangerous and reduce holdings immediately.
“The BCBS standard has not been made legally binding pending transposition in Europe,” stated a newsletter of the ECB. It is responsible for supervising the largest banks within the currency bloc. Banks are required to adhere to the standard in order to participate in the market. They also need to consider it when planning their capital and business.
Recently, the BCBS proposed that unbacked digital assets like bitcoin (BTC) be assigned the highest risk weight possible of 1,250%. This means that banks will have to issue capital equal in value to their crypto holdings. They would be restricted to holding crypto not exceeding 1% (known as Tier 1) of their core capital.
BCBS norms do not have legal force, but some legislators at the European Parliament want to present rules that address key elements of the supervising bodies’ proposals.
The ECB published a survey on Wednesday stating that distributed-ledger technology was “barely used across bank branches” with less than one fifth of banks seeking to use the solutions. Additionally, crypto exposures and activities are “insignificant.”
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
