Check out the newly released report from BIS on handling crypto asset exposure, dated December 2022.
Starting from January 1, 2025, banks will be allowed to keep 2% of their reserves in cryptocurrencies.
However, the report also cautions that if banks fail to comply with AML or CFT regulations, they could face operational losses.
The policy will start from January 2025 and it is an improvement of the earlier 1% benchmark for banks. This is a piece of good news considering that BIS is made up of 63 central banks which includes some of the top economies in the world. Projecting to increase crypto reserve in 2025 also indicates that the crypto sector is here to stay and is also considered an important part of the global financial system just as gold. Although this policy promotes centralization it is also leading to crypto awareness and adoption.
This is the main problem. If a citizen has used some kind of crypto service from a bank, he will no longer be able to hide his assets. 5 years ago, scammers thought they could obfuscate their transactions using blockchain mixer algorithms, but now companies like chainalysis have analysis methods.
This has nothing to do with customers.
BIS is only institution that centralizes member's CB decisions, and it only coordinates monetary policies.
Those 2% will not be user's cryptocurrency but private banks own reserves, just as bank can under the current rules user 15% of their Tier 1 before Basel 3 for non-redeemable preferred stock they can now fill up to 2% on cryptos, it changes nothing for the user. Before you deposited $100, under the rules the bank was forced to use 6$ for Tier 1, so that's $6, and now it can use 2% of that, so 12 cents of its mandatory reserve to buy crypto coins, even if the depositor is a crypto hater.
But being able to doesn't mean they will.
But in your opinion, why this decision?
BIS tells banks about risks and losses, but other economists say that banks have long been bankrupt, and their balance sheets contain assets that are worth nothing, so every year governments pour huge liquidity into these banks to avoid financial collapse.
Because allowing to do a thing doesn't mean they will, and allowing crypto doesn't mean they will go for some meme coin.
This is the thing, tier 1 reserves must always meet a % of the bank reserve and bank deposit, if they go under then the bank must balance its account to cover it, by either restricting lending, moving other things from other tiers to T1 or etc etc.
No bank will play monopoly with crypto and going for the 2% as a dump can trigger a force sell of other assets , so what they will choose and BIS knows this better than anyone is stable coins, which means filling their T1 with basically $, and instead of having to balance this with fluctuating crypto they will use this a a balance since it's usd nominated.
How long have you heard about banks falling and crashing and the banking sector dead?
You have a wrong view on those assets, which are much like Bitcoin, so here is an example:
- you buy $10k worth of Bitcoin, where are those $10k? They are not in Bitcoin, they are in the pocket of the guy that sold you the coins. For your coins to be worth $10k you don't use the receipt, you need another guy to buy them at $10k and so the circle goes.
- bank assets are nothing different, their assets go up and down in value, the only thing that triggers a collapse is when the collateral on the loans is going down and there is no money to be taken from the loaner to prop it up.
When does this happen? Well, when there is no more money invested in the said assets, which brings us up to Bitcoin, what will happen when the guys that were supposed to buy your 10k coins with 20k are no more and there is only a guy with a 100 bill?
If all the assets a bank holds go down they will go down because the people won't pay a dime for it or don't have a dime to pay for it , which means that before the banks fall we're royally screwed already!
Think of it as Walmart going out of business because they don't have food to sell, don't you think there is a bigger problem already than your stock crashing?
Thanks for your opinion. Have you seen the movie Big Short?
There is a similar situation on the market. The S&P 500 is at its maximum levels, and similar indices of other countries are showing the same dynamics. The financial sector in many countries accounts for 30 to 80% of total GDP, and this is a big bubble in which banks play a major role. If the market goes down, banks are left with depreciated collateral.
I use these resources. See the real level of the economy of your countries yourself. I myself have seen some European countries where the indicator of the financial market in GDP is very large. And the financial market is speculation and not the production of new goods.
https://www.statista.com/statistics/248004/percentage-added-to-the-us-gdp-by-industry/