According to a Reuters report, the Bank of England’s deputy governor is willing to embrace Basel Committee’s capital requirements for banks exposed to cryptocurrencies.
The proposed rules dictate that banks with exposure to digital assets should set aside capital funds equivalent to their holdings to cover investor losses.
Woods termed these rules “quite sensible” and said that banking institutions would have to ensure that “capital treatment is pretty robust” as crypto services develop into “something big.”
While England’s central bank is supportive of Basel’s capital requirements, major banks don’t share the same view.
On Tuesday, the Global Financial Markets Association, which includes the likes of JPMorgan and Deutsche Bank, criticized the global rules as “overly conservative.”
Trade associations are also concerned that the requirements would prevent banks from holding cryptocurrencies, which in turn could encourage unregulated entities in the financial system.
Back in June, the Basel Committee had stated that banks should implement a 1,250% risk weight on Bitcoin, which is “similar in effect to the deduction of the asset from the capital." That means if a bank holds $100 worth of Bitcoin, it should assign the stash a risk weight of $1,250. This amount should be multiplied by the 8% capital requirement, which then results in $100 being set aside to cover risks.