We can see that the US, European Union, and almost every country in the world is coming up with rules and regulations on cryptocurrencies, some are trying to shut them down directly while others are trying to put heavy taxes on the users and let the industry suffer the slow death. Apart from all the negative aspects, there are some positives as well, including small countries like St. Kitts are on the way to legalizing BitcoinCash as legal tender, Nigeria is on its way to do so, and a recent announcement from BCBS is one of that positive news for crypto adoption.
1. Global Banks to Store Crypto: 2% of Their Assets
Out of the clouds of negative news, there is one positive news for the crypto space at the institutional level. The Basel Committee on Banking Supervision (BCBS) has allowed global banks to keep crypto holdings up to 2% of their entire assets. If you are not aware of what BCBS is, then consider it as a group of central banks that sets the rules and policies of the banking system, it has 45 members which represent 28 jurisdictions. Some of the member central banks are from the world’s leading economies such as the United States, China, European Union, India, and United Kingdom. This short introduction of BCBS might be enough for guessing the power of this group over the world’s banking system.
The recently published report by BCBS talks about the bank's exposure to cryptocurrency holdings. In the report, they categorized cryptocurrencies into two categories, one which includes tokenized traditional assets & cryptocurrencies with an ‘effective stabilization mechanism’ aka Stablecoins, and the second category includes relatively risky cryptocurrencies, which means all the cryptocurrencies including Bitcoin fall under this categorization. They have an entire report on categorization based on various factors, so if you are interested in diving deep into it then you can download the report using this link.
Key Points of Report:
- A Bank’s total exposure to Group 2 cryptocurrencies should not exceed 2% of the bank’s Tier 1 capital and should generally be lower than 1%.
- Algorithmic stablecoins do not fall under Group 1 categorization.
- The BCBS committee has agreed to implement it by January 1, 2025.
2. $30 Million Outflow In a Week: Largest In Past Months
After the LUNA, Celsius Network, and FTX going down brings negative sentiment around the institutional as well as retail investors. FTX is big fish as it is associated with a number of other crypto projects, which will get affected because of the ongoing hearing of the FTX crash. All this results in a fearful market and most of the investors are trying to get out of the crypto space, and this can be seen in the weekly ‘Digital Asset Fund Flow’ report from the Coinshares.
The picture above represents the net flow of the industry. As we can see, the investors were becoming confident again to invest in space and that is why we saw an increasing in-flow but last week there was a huge outflow of $30 Million, which is the largest outflow in the last couple of months. The major outflow took from Bitcoin, which is around $17 Million and the second position is secured by Ethereum with $9 Million. If you want to read the full report by CoinShares, you can find it here. An important thing to note here is that this is the fifth consecutive week where Ethereum saw the outflow, is this the reason for the Ethereum network upgrade?
If you have noticed, you will see institutional investors, long-term Bitcoin holders, and B2B companies in space taking their hands out of the crypto space, is this the normal reaction to the bear market & FED’s decisions regarding interest rates? I leave these questions to you!
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