Capital Buffer Requirements are specific amounts of capital financial institutions must hold as a safeguard against unexpected losses. These requirements aim to strengthen an entity’s financial stability, ensuring it can absorb shocks without collapsing. They serve as a protective layer above minimum capital thresholds, enhancing resilience during periods of economic stress or market downturns. Adherence helps maintain confidence in the financial system.
Context
For crypto-native entities like centralized exchanges, stablecoin issuers, and DeFi lending platforms, the absence of clear, standardized capital buffer requirements presents a regulatory challenge. Regulators worldwide are considering how to apply traditional financial stability measures to the digital asset sector to protect consumers and prevent systemic risks. This discussion is central to the broader regulation of digital finance, influencing operational costs and market access for crypto firms.
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