00:00Welcome back to Decentralized News. In today's video, we are looking at a new move by the Bank of International Settlements, which is set to allow banks to actually keep 1% of Bitcoin in reserves.
00:19So this is actually coming off of the heels of the skeptical approach that obviously the BIS has been taking to digital currencies. We have made videos previously about some of the literature that they've put out, which hasn't been necessarily crypto-friendly.
00:40And this has also been exacerbated by the recent market crash, of course. But it looks like the BIS has done its research.
00:50They are intending to extend their hand to the new asset class by allowing banks to actually hold up to 1% of reserves in cryptocurrencies, such as Bitcoin,
01:01which is a major move because the BIS's Basel Committee on Banking Supervision, which is the BCBS, has actually made the proposal for limiting banks
01:14and from actually having total exposure to Group 2 cryptoassets to 1% of Tier 1 capital.
01:24In its consultative document titled The Second Consultation on the Prudential Treatment of Cryptoassets, which came out just at the end of last month in June.
01:37So the Group 1 versus the Group 2 assets, specifically Group 2 referring to assets that do not need to meet classification conditions
01:45and includes specific tokenized traditional assets and stable coins, as well as unbanked crypto assets, as opposed to, say, Group 2.
01:56Group 1 actually includes tokenized traditional assets and stable coins that meet classification conditions as well.
02:04They did actually put out a statement saying that banks' exposures to Group 2 assets will be subject to an exposure limit.
02:13Banks must apply to the exposure limit to their aggregate exposures to Group 2 cryptoassets, including both direct holdings, that's cash and derivatives,
02:24and indirect holdings, those that are investment funds, ETS, ETN, and special purpose vehicles.
02:31So the document also did further go to specify that a bank's total exposure to Group 2 cryptoassets must not be higher than 1%
02:40of the bank's tier capital at all times, and this is in line with the Basel Framework, which includes the BCBS's standards, which I mentioned earlier.
02:54Also explaining that the large exposure rules of the Basel Framework are not designed to capture large exposures to an asset type,
03:04but to individual counterparties or groups of connected counterparties.
03:09So this would imply, for example, that no large exposure limits on cryptoassets where there is no counterparty, such as Bitcoin, which is decentralized.
03:20So with this in mind, the committee also proposes, therefore, introducing a new exposure limit
03:27that's applicable for all these crypto cryptoassets outside of the large exposure rules.
03:33Meanwhile, the provisional limit set at 1% of tier capital would be also reviewed sort of periodically.
03:43And obviously, you know, like we said, they have come out before BIS talking about the risks of DeFi
03:55and how they were not convinced that this would be the new order.
04:01But of course, it seems like they've come to some sort of a decision to allow banks to have this 1% exposure
04:10to digital assets such as Bitcoin on their balance sheet.
04:13So let me know what you think about this development.
04:17Is this something you think will cause inflows of capital as banks now have the sort of go ahead to make these 1% Bitcoin or reserves
04:35as part of what their holdings are.
04:38And if that happens, what would that mean for the Bitcoin price in terms of the buying pressure there?
04:46Otherwise, let me know what other stories you've heard that are pro sort of adoption.
04:51And we need more of those stories, especially in this time where the markets aren't looking as favorable.
04:58But for more, go to decentralized.news.
05:01Don't forget to check out links in the description to my book, Stokenized Trillions, Blockchain Applied.
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