Bank of England’s deputy governor Sam Woods said on Thursday that Britain would become the first to adopt Basel Committee’s capital rules on crypto. The measure would be taken to prevent banks from gaining crypto exposure without the necessary backing. 
<h2>Bank of England to Front Run Capital Rules on Crypto</h2>
According to a Reuters <a href="https://www.reuters.com/business/finance/britain-front-run-capital-rules-crypto-if-need-be-says-bank-england-2021-09-23/" target="_blank" rel="nofollow noopener">report</a>, the Bank of England’s deputy governor is willing to embrace <a href="https://www.cryptoknowmics.com/news/major-banks-oppose-basel-committees-overly-conservative-crypto-rules/">Basel Committee’s capital requirements</a> 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.”

“We would not want to stop firms doing things that make commercial sense, but we would take a very conservative view on capital treatment, and if necessary, we would therefore front-run, maybe not exactly in the same way, but we would put some capital measures in place,” he told Reuters.
<h2>JPMorgan, Deutsche Bank Call Basel’s Rules “Overly Conservative”</h2>
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 <a href="https://www.cryptoknowmics.com/news/institutional-demand-for-ether-more-than-bitcoin-says-jpmorgan/">JPMorgan</a> and Deutsche Bank, criticized the global rules as “overly conservative.”

“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 association said in a letter to the committee.

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.

Bank of England Says Britain Will Front Run Capital Rules on Crypto

Bank of England’s deputy governor Sam Woods said on Thursday that Britain would become the first to adopt Basel Committee’s capital rules on crypto.

Divya is a postgraduate from Jawaharlal Nehru University specializing in International Relations and a professional writer with more than 5 years of experience writing for the web. She is an avid reader interested in the global financial system and the effects of decentralization. At Cryptoknowmics, she hopes to deliver clear and understandable content to inform readers about the latest events in the crypto sector.

Bank of England Says Britain Will Front Run Capital Rules on Crypto

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