Capital requirements relief lessens the amount of capital financial institutions must hold. This measure typically involves reducing the regulatory capital buffer banks or other financial firms are mandated to maintain against potential losses. Regulators may grant such relief during periods of economic stress or to encourage specific lending or investment activities. For digital assets, it could involve adjusted risk weightings or specific exemptions.
Context
Discussions around capital requirements relief in the crypto space often involve proposals to reduce the stringent capital charges currently applied to banks holding digital assets. Financial authorities are considering how to calibrate these requirements to permit traditional institutions greater participation in crypto markets while preserving financial stability.
The SEC's SAB 121 rescission eliminates prohibitive balance sheet constraints, strategically clearing the path for institutional banking entry into digital asset custody.
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