Definition ∞ Capital adequacy standards are regulatory requirements that mandate financial institutions hold sufficient capital to cover their risks. These standards ensure that firms possess a robust financial buffer against potential losses, thereby promoting stability within the financial system. They specify the minimum amount of capital, usually expressed as a ratio of risk-weighted assets, that a financial entity must maintain. For institutions dealing with digital assets, the specific risk weighting and capital requirements are subjects of ongoing regulatory discussion.
Context ∞ The application of capital adequacy standards to digital asset holdings and crypto-native institutions is a critical area of regulatory development. News reports frequently address proposals from international bodies like the Basel Committee on Banking Supervision concerning how banks should account for cryptocurrency exposures. The debate centers on accurately assessing the volatility and unique risks associated with digital assets to establish appropriate capital buffers.
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