- Basel’s new capital rules raise costs for banks handling crypto.
- Banks decrease crypto involvement, impacting market liquidity.
- Bitcoin, Ethereum, and stablecoins face strict capital charges.
The Basel Committee on Banking Supervision has introduced new capital requirements that create a financial chokepoint for banks holding crypto assets, impacting crypto activities globally.
These rules elevate costs, suppress banking sector integration in crypto, and significantly influence key market flows, pressuring banks to reduce involvement with digital assets like Bitcoin and Ethereum.
The Basel Committee on Banking Supervision has introduced new capital requirements affecting banks’ crypto holdings. These regulations increase costs and suppress regulated banks’ participation in crypto activities, making such operations less economically viable and reducing market liquidity.
The European Banking Authority and the Bank for International Settlements play significant roles in implementing and advocating for these rules. The regulations involve high reserves for crypto assets, with Bitcoin, Ethereum, and stablecoins experiencing harsh capital treatments.
Affected banks might retreat from crypto engagement, creating a chokepoint in funding and liquidity. Chris Perkins of CoinFund expressed concerns over these rules, suggesting they’re too costly. He noted, “It’s a different type of chokepoint, in that it’s not direct. It’s a very nuanced way of suppressing activity by making it so expensive for the bank to do activities that they’re just like, ‘I can’t’… If I have a certain amount of capital I want to invest, I’m going to invest it in high ROE businesses, not low ROE businesses.”
Expert opinions suggest these measures may limit financial innovation in crypto markets, particularly for stablecoins and asset-referenced tokens. The historical precedence of regulations like Basel III indicates banks may deprioritize riskier crypto ventures, affecting market stability and flows.
