9 hour ago
1 0
Regulatory Shift May Allow Banks to Hold XRP Directly
Banks have hesitated to hold XRP directly due to regulatory capital rules under Basel III, which categorize XRP as a high-risk Type 2 crypto exposure. This classification requires banks to apply a 1,250% risk weight, meaning for every $1 of XRP exposure, they must hold $12.50 in capital.
- The main issue has been regulatory capital treatment, not demand or technology.
- This has made holding XRP economically impractical for regulated institutions.
Potential Regulatory Changes
- XRP's reclassification into a lower-risk category under Basel III could change its economic viability for banks.
- If reclassified, XRP could become a Tier-1 digital asset, suitable for balance sheet exposure.
- This would allow banks to custody, deploy, and settle using XRP without excessive capital requirements.
This is crucial for determining if large institutional money can participate in holding XRP. Such changes would shift liquidity provisioning from off-balance-sheet usage to direct institutional ownership.
