BIS to allow Banks to hold 1% reserves in Bitcoin


BIS’s Basel Committee on Banking Supervision (BCBS) extended its hand toward the crypto & blockchain industry. 

Bank for International Settlements (BIS) is a global financial institution. BIS is owned by central banks which “fosters international monetary and financial cooperation and serves as a bank for central banks”.  From the very beginning, BIS showed bitter & negative stances against this crypto industry because of the high volatility in the value of crypto assets. 

The Basel Committee on Banking Supervision (BCBS) from BIS introduced its proposal to allow the banks to hold 1% reserves in Bitcoin or some leading cryptocurrencies. 

BCBS published its proposal on 30 June and under its plan bank will be allowed to use Group 2 crypto assets to 1% of Tier 1 capital” in its consultative document titled “Second consultation on the prudential treatment of crypto assets. 

Group2 is that crypto assets category under which those digital assets will fall under that category which are not perfect or exactly defined under a particular asset class, While Group1 will include those assets which are perfectly categorized like stablecoin. 

The perfect understanding of the Group1 and Group2 assets category can be understood via the attached picture below. 

BIS to allow Banks to hold 1% reserves in Bitcoin 1
Group 1 vs. Group 2 assets. Source: Bank of International Settlements

BCBS published document stated:

“Banks’ exposures to Group 2 crypto assets will be subject to an exposure limit. Banks must apply the exposure limit to their aggregate exposures to Group 2 crypto assets, including both direct holdings (cash and derivatives) and indirect holding (ie those via investment funds, ETF/ETN, special purpose vehicles).”

Earlier, BIS took the reference of the significant correction in the prices of Crypto assets and warned people about their crypto investment activities and also warned people about the risk associated with decentralized finance (Defi). In the past, BIS also released its statement on cryptocurrencies and claimed that cryptocurrencies don’t meet with the role of money, so can’t be used in the payment system. 

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