Capital Adequacy Framework

Definition ∞ A capital adequacy framework comprises the rules and regulations that dictate the minimum amount of capital financial institutions must hold to absorb potential losses. These frameworks ensure the stability and solvency of banks and other regulated entities. In the context of digital assets, regulators are adapting existing frameworks or creating new ones to account for the unique risks associated with cryptocurrencies. This includes establishing specific capital charges for crypto exposures.
Context ∞ Discussions around capital adequacy frameworks are central to integrating digital assets into traditional finance, frequently appearing in financial news. Regulators globally, such as the Basel Committee on Banking Supervision, are actively developing standards for banks’ crypto holdings. The evolution of these frameworks directly impacts how financial institutions can safely and prudently engage with the burgeoning digital asset market.