Global Banking Regulators Call For Toughest Rules For Cryptocurrencies (theguardian.com) 58
An anonymous reader quotes a report from The Guardian: Global regulators have said cryptocurrencies such as bitcoin should come with the toughest bank capital rules to avoid putting the wider financial system at risk should their value collapse suddenly. The Basel Committee on Banking Supervision, which consists of regulators from the world's leading financial centers, is proposing a "new conservative prudential treatment" for crypto-assets that would force banks to put aside enough capital to cover 100% of potential losses. That would be the highest capital requirement of any asset, illustrating that cryptocurrencies and related investments are seen as far more risky and volatile than conventional stocks or bonds.
The world's most powerful banking standards setter warned on Thursday that certain crypto-assets had proved to be highly volatile, meaning they could "present risks for banks as exposures increase, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering/terrorist financing risk; and legal and reputation risks." However, it said looser rules could apply to stablecoins -- a new form of digital asset usually pegged to the value of a traditional currency -- that may require only a level of capital rules applied to traditional assets such as bonds, loans, deposits, equities or commodities. The committee's proposals, which will now go out for consultation, are meant to help protect the global financial system in case cryptocurrency prices plummet.
The world's most powerful banking standards setter warned on Thursday that certain crypto-assets had proved to be highly volatile, meaning they could "present risks for banks as exposures increase, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering/terrorist financing risk; and legal and reputation risks." However, it said looser rules could apply to stablecoins -- a new form of digital asset usually pegged to the value of a traditional currency -- that may require only a level of capital rules applied to traditional assets such as bonds, loans, deposits, equities or commodities. The committee's proposals, which will now go out for consultation, are meant to help protect the global financial system in case cryptocurrency prices plummet.
Banks are not the risk point (Score:3)
Banks aren't even close to being a risk factor in crypto, eschpeially with most of them limiting any client exposure...
Not sure how you are supposed to manage that either with the volatility, does a bank need to keep around the value of 100% of crypto as measured by the value at some specific point in the day? Or maybe it's just 100% of the entry price obtained at?
Anyway, the real danger to the crypto market is actually Tether, which is used by a TON of people who buy a Tether token (linked to real currency in theory) and then can use leverage against that I think up to 60x, to buy other forms of crypto.
If you look at what Tether holds to back the tokens though it's a real grab bag of assets, including other crypto also. So if there was a run on that poof it would be toast.
The instability of leverage on leverage has me super leery about putting such all into crypto even though fundamentally I feel like having some crypto is a really good idea, to keep some money outside the system... probably not as good as gold and silver, but still it's something more portable.
Re: Banks are not the risk point (Score:3)
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"Crypto was designed to solve the issues the banking system causes."
Crypto was designed to create a gold rush and make some people rich.
FTFY
Re: Banks are not the risk point (Score:4, Insightful)
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> So the opposite of Saloomy's claim then.
Saloomy's claim was that the goal of cryptocurrencies was to reduce the price of a transaction to being very low. That's absolutely wrong, no question at all. Nowhere did Satoshi imply that this was a goal, and even if the blockchain required absolutely no effort with guessing hashes, it would still be vastly less efficient to have a million computers all around the world doing public key cryptography to verify that the transactions were legit (a trivial part o
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The banks, like any other type of corporation and any private individual are free to be involved in crypto currencies (no, it is not "crypto") as much as they like. This is just a statement on how much intrinsic value crypto currencies actually have and they have correctly determined that to be zero.
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Crypto is allegedly "currency' and 'assets'. But you don't want banks to be allowed to get involved? It's their traditional area of expertise.
What exactly are you scared of? Why shouldn't banks be involved?
Don't you want crypto to be brought out into the light where everyone can see what's going on? What's the benefit of keeping it hidden in the shadows?
Re: Banks are not the risk point (Score:2)
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The governments just pretend to hate them so no one catches on, but they're a totalitarian's wet dream come true.
But the most totalitarian country (China) is the one most strongly against it.
Are you claiming they are faking it, and secretly want everyone in China to use bitcoin instead?
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If the government is forbiding something then the population will love it. Prohibition anyone?
Banks are a risk to crypto (Score:1)
The risk is not to crypto it is to the Banks
If enough banks hold crypto they are a danger because of forced sales that can occur.
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Banks aren't even close to being a risk factor in crypto
Yet.
Re: Banks are not the risk point (Score:2)
Not sure how you are supposed to manage that either with the volatility, does a bank need to keep around the value of 100% of crypto as measured by the value at some specific point in the day? Or maybe it's just 100% of the entry price obtained at?
That's already a solved problem, just look at how margin limits are calculated by brokers.
In a sane, rational world... (Score:3)
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If there problem is global warming, why are you fixated on carbon? You should focus your efforts on reducing warming, in a sane and rational way. You have not made a case for your suggestion and are getting side-tracked.
I realize that there is a a relation between carbon and warming, but yours is not how warming will be reversed. Be realistic, follow the science and economics, and your strategy may turn out to be different.
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If there problem is global warming, why are you fixated on carbon?
Because carbon dioxide in the atmosphere is the single largest factor that humans contribute to.
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My bad. I thought the problem is global warming.
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Re:In a sane, rational world... (Score:5, Insightful)
The world we are in is neither sane, nor rational. I think that ought to be obvious by now.
Re:In a sane, rational world... (Score:4, Insightful)
Yep. All cryptocurrencies need are enough believers.
(There's no shortage of those so far...)
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You deserve the Funny mod, but there's also some insight there. The gambling thing really is key. Let me summarize again, though my motivation is hoping that someone will provide constructive suggestions or a better summary of Bitcoin. I'm limiting this comment to Bitcoin because I've studied it most closely and I believe it is obviously a kind of lottery and the motivation of the Bitcoin speculators is a kind of gambling frenzy.
The scheduling of the Bitcoin lottery is based on when the transaction data blo
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Well, several aspects of the current global situation should make it amply clear that "sane, rational" is not the model a lot of people operate under.
They can't have it easy. (Score:2)
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That wouldn't be fair and cryptocurrencies might replace them.
Banks do more than just store your money. How exactly does one ask the Bitcoin network for a loan?
In order to replace a competitor, you have to provide a service that is at least on par with what already is being offered. Bitcoin is fucking useless, because I don't get paid in Bitcoin and I don't spend Bitcoin, so the mere requirement to even have anything to do with Bitcoin is itself, a huge inconvenience. Yes, some people manage to make a profit buying and selling it at the right times, but as a safe,
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How exactly does one ask the Bitcoin network for a loan?
Decentralized finance
I don't think there is a way to do it only with the bitcoin network as you need a way to execute smart contracts. However, Ethereum does this well. Wrap your bitcoin to use on Ethereum and venture into the world of decentralized finance.
Here are some of the most popular.
Compound - compound.finance
AAVE - aave.com
Maker - makerdao.com
Crypto is not suitable for banks (Score:2)
\o/ (Score:1)
How many traditional banks are currently laundering money for cartels?
Are we to deny this freedom?
Present risks for banks (Score:2)
Wait! What?
Dogecoin is now currency? When I went to sleep last night, it was an asset. Not something that banks need to concern themselves with.
Banks need to look at various asset classes and say, "That's nice. But we aren't going to loan you one cent on that crap." And they shouldn't be carrying it on their books either. Well, OK, they can. But cryptocurrencies, phony mortgage backed paper and credit default swaps should have a multiplier of zero when calculating banks' capital reserves.
Re:Present risks for banks (Score:4, Insightful)
You seem to have some reading comprehension issues. This just says that if a bank holds any cryptocurrency as an asset, it is do be regarded as 100% speculative and the bank must be prepared to deal with its market value dropping to zero. Since all this wannabe crypto "currencies" have an intrinsic value of zero, that is as it should be.
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regarded as 100% speculative and the bank must be prepared to deal with its market value dropping to zero
How about regard it as not an asset. Not the possibility of its value dropping to zero. Being zero from the start. This way, nobody will be able to buy Bitcoin on a margin even at its peak value.
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Dogecoin is now currency? When I went to sleep last night, it was an asset. Not something that banks need to concern themselves with.
Banks don't need to concern themselves with assets now?
This 'new math' thing has finally gone too far.
Embrace, Extend, Extingush (Score:4, Interesting)
Now that crypto has proven it's not a flash in the pan and isn't going away, they want laws to cripple it.
Then they're going to get laws passed so you can only own THEIR cryptocurrencies.
A tale as old as time...new technology threatens the established power and they make it illegal so the plebes never get any power for themselves.
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Crypto has proven it's just a game token and nothing more, and yes it is a flash in the pan that will run out of suckers to pump it's value.
Crypto is no threat to established power. It's an annoyance in various ways because of its many bad properties.
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It soaks more suckers than even, you mean. pump dump and repeat, go ahead and jump on the elevator now, sucker.
There is nothing "conservative" about identifying toxic trash only driven by hope, hype and hooey.
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Now that crypto has proven it's not a flash in the pan and isn't going away, they want laws to cripple it.
This is explicitly exactly the other way round. Some reading comprehension required to see that.
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Now that crypto has proven it's not a flash in the pan and isn't going away, they want laws to cripple it.
It's precisely because crypto has the potential to be flash in the pan that they need these regulations.
You can't have a bank saying they have X billion dollars in assets, so they are allowed to make loans for some % of that. When the X could easily drop to zero. The bank would be insolvent.
The riskier the banks assets are, the more they are required to hold in reserve in case those assets lose value. It's nothing new or special. They are just letting the banks know how risky they think those kinds of ass
Cool! (Score:2)
Makes sense (Score:3)
These "assets" have an intrinsic value comparable to hot air and hence them crashing to zero must reasonably be expected at any time.
Hot air can be quite useful. (Score:2)
These "assets" have an intrinsic value comparable to hot air and hence them crashing to zero must reasonably be expected at any time.
Hot air has much more intrinsic value. You may have a balloon you want to rise. Or you might be a politician for example. Hot air can be quite useful.
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These "assets" have an intrinsic value comparable to hot air and hence them crashing to zero must reasonably be expected at any time.
Hot air has much more intrinsic value. You may have a balloon you want to rise. Or you might be a politician for example. Hot air can be quite useful.
Not for a bank. In general, you are perfectly correct, of course.
And your stock & bonds are? (Score:1)
Banks are not mandatory (Score:2)
Remember your history. Banks came out because of practical concerns, but money worked long before they were a thing. And the central bank versions are a very recent modern invention. In fact, it was a very contentious topic here in the US.
So, while the modern times makes their services necessary, they don't get to "own" our money. They are not even the only financial institutions in town. In fact, many of our recent crisis can be traced back to banks doing bad things, including the recent housing one, all t