Definition ∞ Capital adequacy rules mandate the minimum amount of capital financial institutions must hold against their assets. These regulations ensure banks possess sufficient financial reserves to absorb potential losses. The objective is to maintain solvency and protect depositors and the broader financial system. These rules are critical for overall financial stability.
Context ∞ In the context of digital assets, capital adequacy rules are a significant topic for banks holding cryptocurrencies. Regulators are evaluating how existing capital requirements apply to the volatile nature of crypto assets. The current debate concerns setting appropriate risk weightings for various digital asset exposures to safeguard financial institutions.
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