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Banks can have a maximum 1% of reserves in Bitcoin. The new proposal from Basel

According to the Basel Committee on Banking Supervision, financial institutions should comply with a cap on the amount of Bitcoin they hold. This figure has been set at 1%, or at least that is the proposed bill the Commission would like to pass.

Basel and the consent for banks to hold reserves in Bitcoin

According to the Basel committee, banks will be able to hold Bitcoin in their reserves up to a maximum of 1% of their capital

1% sounds very little, but it would actually already be a big step forward in terms of regulation, and it would still be about $1.8 trillion.

Basically, we are talking about the maximum amount of capital that lenders can hold in terms of their Bitcoin exposure. Each bank will be able to hold up to 1% of their capital, and of course in the case of large banks, we are also talking about millions and millions of dollars.

This Commission meeting follows the meeting last year, when, however, international standards were not reached because they were too stringent.

Now, perhaps after the collapse of the cryptocurrency market and the numerous scandals in terms of hacks and collapses of entire projects (see the Terra-Luna ecosystem and the UST stablecoin), the Commission would come to a verdict.

What does the Basel Commission deal with?

The Basel Commission on Banking Supervision regulates financial institutions around the world. It was founded in the late 1970s within the Bank for International Settlements (BIS) in Basel. The committee is composed of representatives of central banks and banking supervisors from 27 countries. 

Notably, Switzerland is represented on the Basel Committee by FINMA and the Swiss National Bank.

Not only Bitcoin but also algorithmic stablecoins

The proposal actually mentions not only BTC but high-risk cryptocurrencies in general.

During the meeting it was said:

“The large exposure rules of the Basel Framework are not designed to capture large exposures to an asset type, but to individual counterparties or groups of connected counterparties. This would imply, for example, no large exposure limits on cryptoasset where there is no counterparty, such as Bitcoin”.

Thus, the 1% cap would apply not only to Bitcoin, but also to algorithmic stablecoins that are backed by other crypto but managed by algorithms.

Amelia Tomasicchio
Amelia Tomasicchiohttps://cryptonomist.ch
As expert in digital marketing, Amelia began working in the fintech sector in 2014 after writing her thesis on Bitcoin technology. Previously author for several international crypto-related magazines and CMO at Eidoo. She is now the co-founder and editor-in-chief of The Cryptonomist, and also PR manager for the Italian market at Bitget. She is also a marketing teacher at Digital Coach in Milan and she published a book about NFTs for the Italian publishing house Mondadori, while she is also helping artists and company to entering in the sector. As advisor, Amelia is also involved in metaverse-related project such as The Nemesis and OVER.