September 23, 2021
The biggest US and European banks are asking for more freedom regarding crypto regulations, YahooFinance reported.
These decentralized digital currencies are immune to government interference and are becoming more and more popular, making people willing to invest in them.
The Financial Services Forum (FSF) was behind this request. It represents Bank of America, State Street, Wells Fargo, BNY Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley, some of the largest banks in the US. What they ask from the Bank for International Settlements (BIS) Basel Committee is to ease the regulations they plan to impose on banks.
Current Regulations Too Conservative
Banks oppose the strict rules imposed on them, which require any bank that is involved with cryptocurrencies to set aside a dollar for every bitcoin they own. The proposal framework was published in June this year. It was planned to differentiate stablecoins from the more volatile cryptocurrencies like Bitcoin.
In the proposal, BIS informs that those who will fall under Group 2 would be subject to new effective treatments. Bitcoin is most likely to be a part of it. The Basel Committee will impose 1,250% risk weight on those in Group 2. Higher risk weights mean that the bank would need to hold more capital to prevent any losses resulting from those assets.
Regarding the current regulations, FSF said: “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.”
Bank regulators stand strongly behind their opinion that BIS should encourage deeper involvement in the digital assets by the banks and expressed concerns over the Basel Committee’s approach. However, Securities and Exchange Commission Chair Gary Gensler is convinced that riskier cryptocurrencies should be treated as the committee advises.
The global financial industry warns regulators that if the new regulations are enforced, it may drive Bitcoin trading underground. It also raises concerns over whether investing in Bitcoin is a smart move as a whole.