International banking regulators\u2019 decision to classify Bitcoin as the riskiest of assets dragged cryptocurrencies further into the mainstream financial world.<\/p>\n
It also made it extremely costly for banks to hold digital tokens on their balance sheets, potentially delaying crypto\u2019s wider adoption.<\/p>\n
The Basel Committee on Banking Supervision proposed that a 1,250% risk weight be applied to a bank\u2019s exposure to Bitcoin and certain other cryptocurrencies. Bitcoin jumped on the announcement before paring the gains.<\/p>\n
\u201cThe only consistency has been the volatility — it\u2019s been big spikes, tons of enthusiasm, followed by big selloffs,\u201d Ross Mayfield, investment strategy analyst at Robert W. Baird & Co., said of Bitcoin\u2019s moves.<\/p>\n
\u201cIf you believe in it you\u2019re probably to stomach the volatility, but if you\u2019re just in it because it seems like the hot way to get a quick buck, that volatility is going to be hard to deal with.\u201d<\/p>\n
The ruling sparked a bevy of reactions across Wall Street and other financial centers worldwide.<\/p>\n
Luke Sully, CEO at treasury technology specialist Ledgermatic:<\/p>\n
\u201cIt\u2019s a piece of news that both advocates and critics of Bitcoin will declare as a win. It demonstrates that Bitcoin is now a recognized asset class with risk management parameters for the banks, but these same parameters could be a potential deterrent given the onerous capital requirements that may make it an unpalatable business,\u201d he said. \u201cThere are a few underlying assumptions in this risk weighting, the most obvious being that the price may go to zero and investors could lose their full allocation. The capital requirements don\u2019t protect the banks clients from transaction, settlement and FX volatility either.\u201d<\/p><\/blockquote>\n
David Tawil, president of ProChain Capital, a crypto hedge fund:<\/p>\n
To me, this whole thing, along with the IMF, is just a way for those entities to get involved in the conversation. In terms of putting these requirements it\u2019s going to go ahead, and at least for now, take traditional banks that are traditional regulated by these regulatory entities essentially out of this game and that will allow for more and more alternative players, who are not regulated, to go ahead and to pull further ahead,\u201d he said. \u201cA regulator has very little upside and enormous downside — it\u2019s like being a policeman. You want to protect people. So the furthest you can go in terms of lodging measures that stop activity, the better. And so, I think that they are for the first time inserting themselves. This certainly does not mean the end of cryptocurrency, the end of Bitcoin.\u201d<\/p><\/blockquote>\n
Marc Chandler, chief market strategist at Bannockburn Global Forex:<\/p>\n
\u201cI don\u2019t think these things are good or bad themselves — it depends on what the objective is,\u201d he said. \u201cIt\u2019s not decentralized, it\u2019s highly concentrated. Crypto was born in an age in which we had very extreme disparities of wealth and income — how can it not reflect that? The bulk of Bitcoin that\u2019s owned by wallets have more than 100 Bitcoins, that\u2019s more than $300,000 — how many Americans have $300,000 to put into crypto as opposed to retirement money?\u201d<\/p><\/blockquote>\n
Matt Maley, chief market strategist for Miller Tabak + Co.:<\/p>\n
\u201cObviously tougher capital requirements cause banks to have more capital on hand — that can have an impact on their earnings. The committee is saying because of risks involved — cryptocurrencies are very volatile — you have to have more capital on hand to protect against declines,\u201d he said. \u201cIf it\u2019s going to cost banks more to hold these cryptocurrencies on their books, they\u2019re theoretically going to be less likely to hold the same kind of size as they otherwise would.\u201d<\/p><\/blockquote>\n
Wells Fargo analyst Mike Mayo said in a Bloomberg TV interview with Matt Miller:<\/p>\n
\u201cIt is getting hammered, but you know what? It\u2019s getting treated like any other higher-risk asset like subprime loans, or CDOs, or derivatives, or structured products. And it is a new product. It\u2019s untested through economic cycles. It\u2019s untested through liquidity.\u201d<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"
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