Amid a volatile twelve year low earth orbit gravity well rollercoaster ride occasionally piercing the mesosphere, the metaphor barely encapsulates the multitudinous variables, the cryptocurrency marketplace may finally infused with a dusting of regulatory policy. While licensed institutions have largely avoided Bitcoin and related electronic fiscal monetary tokens, and for good reason, as the highly fluidic valuation methodologies are based on almost pure speculation and not traditional commodities, a respite for wary investors may be forthcoming. The Basel Committee on Banking Supervision (BCBS), an organization which historically drafts and upholds the gold standard for the implementation and facilitation of rigorous pecuniary framework is apparently primed to take a stab at providing a comprehensive template to stabilize the cryptocurrency hysteria, at least from the perspective of largescale financial firms and vaults.
The long-overdue free market-induced legislation will require banks to put their money where there mouth is, in either establishing Bitcoin and notable clones as a legacy monetary system for the near future, or exposing the entire racket as an elaborate and sordid ponzi-scheme. In the current frenzied marketplace driven by the visceral rather than logic, accountability from top down is taking an extended introspective journey through the remaining forests of Madagascar, and while the jeweled tribal new wave musical chants of Yanni would have sufficed for dimestore spiritual enlightenment, proximity is not the ally of the fraudulent Rembrandt.
As billions of dollars of lucrative sums have endured the fate of criminal hackers on vulnerable cyber-wallets with devastating one-click and “poof” the money is gone attacks, and the inability to remember passwords, the current deregulated infrastructure lacking reasonable guarantees, and profiting the sketchy architects lurking in the dangerous corridors of the dark web, the push by the BCBS to bring banks into the mix as a potentially mitigating influence is both a blessing and curse.
The organization’s approach in attempting basic compliance will split the cryptocurrency marketplace into three distinct categories in forcing the prodigious hallmarks of the banking realm to evaluate and process the risk and reward of various digitally-based investments. The separated groupings will include a bubble for Non-fungible tokens (NFT’s), or just about any real or electronic object verified by a unique 64-character hash of the blockchain, stablecoins, or electronic currency substantiated and backed by hard currency or tangible commodities, and finally the viral frontline actors of Bitcoin and the infamous variants. Each specified compartment addresses varying financial requirements in ensuring that banks are able to cover the potentially chaotic ramifications of the schizophrenic marketplace. While NFT’s are recommended to follow the requirements of heritage assets, holding wild-wild west cryptocurrencies will require hefty sums of capital and could deter midsized banks from dealing with the ugly cost-benefit analysis of allowing customers to deposit members of the Bitcoin family. Relatively safe financial bets such as mortgages require the bank demand a asset-weighted risk factor of 50%, and the BCBS proposal recommends the shocking figure of 1250% for viral cryptocurrency, meaning that the holding syndicate would have to match a $1000 thousand investment. The unyielding math if not prophetic, is brutal.
Amount invested x Risk weighted percentage rate x Bank minimum capital requirement = Minimum capital required at Bank to cover risk
Thus, $1000 x 1250% x 8% = $1000
This simple formula clearly illustrates how remote from the mainstream cryptocurrency remains, especially with the notable absence of a relationship with retail behemoths Amazon or Walmart.
As this reality will discourage fiscal organizations from absorbing the risk to diversify in wavering digital currencies, the aversion to Bitcoin emanating from China adds another permutation in an already loaded self-driving semi-trucks of reasons why the average investor should not invest their hard earned money in a product that rivals a sham. When the biggest players in a currency are rogue governments and criminal organizations, attracted to the deregulated privacy benefits like moths to a porch light on a lazy Summer evening, the most reasonable course of action for everybody else is to run for the hills, now that the honeymoon of novelty has officially ended. However, this perspective should in no way hinder the innovative entrepreneurs of Dogecoin or other Litecoin forks in attempting to improve the world through technology. If simply for political purposes, Second Amendment supporting techies should piggyback on the concept of Guncoin, and develop a vehicle that supports lobbying efforts.
With inflation on the horizon as a result of the Biden administration’s antiquated economic and labor policies, the future of the entire gamut of investments will be an arduous challenge over the next four years.
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