Capital mandates are regulatory requirements imposed on financial institutions, dictating the minimum amount of capital they must hold. These mandates ensure institutions possess sufficient financial resources to absorb potential losses and remain solvent during adverse market conditions. They aim to safeguard depositors and maintain overall financial system stability. Adherence to these rules is a fundamental aspect of prudential regulation.
Context
For crypto firms, capital mandates are a growing area of regulatory focus, particularly as digital asset services gain prominence. Regulators are assessing how to apply traditional capital adequacy rules to novel crypto business models and asset types. The debate centers on appropriate risk weightings for volatile digital assets and the necessary reserves for stablecoin issuers. Future regulatory frameworks will likely impose more explicit capital requirements on virtual asset service providers.
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