Developments in the cryptocurrency sector without a proper approach to control can increase risks to the global banking system, according to the Bank for International Settlements (BIS), also known as the "Central Bank of Central Banks".
The Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlements said that banks should have sufficient reserves to fully cover losses from investments in cryptocurrencies.
BCBS works with the Bank for International Settlements and is engaged in the creation of common regulatory standards. According to the BCBS press release, such risks are still limited for credit institutions, but they may threaten global financial stability in the future.
The Committee presented the rules for "risk weighting" for banks with access to different types of assets. For conventional cryptocurrencies, including bitcoin, the risk factor will be 1250%.
This means that any bank that owns bitcoin or other crypto assets will be required to have in stock the amount of fiat currency, 12.5 times the amount of its investment in digital assets.
Tokenized assets and stablecoins will be subject to the same rules as bonds, loans, commodities, and stocks.
The statement of the Basel Committee came after the government of El Salvador expressed its readiness to use bitcoin as a legal tender, despite the high volatility of the cryptocurrency market.
Many participants in the cryptocurrency industry believe that the "Basel rules" will prevent the widespread adoption of crypto assets among institutional investors. The recent bitcoin rally was largely due to the investments of large organizations.