Central Banks BUYING Bitcoin?! The Clearest Sign Yet!

Earlier this month the bank for International settlements or bis Released standards that will allow Central banks around the world to start Holding cryptocurrency on their balance Sheets from 2025. this is unprecedented Because the bis and central banks have Long been votally opposed to Cryptocurrencies this sudden 180 Suggests that something big is coming And I think I know what it is So today I'm going to summarize the Bis's crypto custody standards for Central banks explain what they say in Simple terms and tell you why these Standards will set the stage for Exponential crypto price action To quickly recap the bis is the So-called bank for central banks and it Works closely with almost every Central Bank in existence If you've been keeping up with our bis Updates you'll know that most of its Recent work has involved coordinating The development of Central Bank digital Currencies or cbdcs if you've watched Any of our videos about cbdc's you'll Know that they are seriously dystopian As they would allow governments to have Total control over what you can buy when You can buy it and even how much you can Save By contrast cryptocurrency lets you have Total control over your assets newsflash

Having total control over your assets is What it actually means to be financially Free Now the bis's obsession with Centralization via cbdc's has its roots In the reality that the Global Financial System is extremely fragile This fragility is due to a combination Of factors including unpayable debts Technological deflation which makes These debts more expensive and inflation Which causes distrust This is why the bis releasing standards For central banks to hold Cryptocurrencies on their balance sheets Is so mind-boggling cryptocurrencies are Literally the opposite of the financial Centralization the central banks want as You'll soon see however there's much More to this story than meets the eye Now the document detailing the bis's Crypto custody standards for central Banks is titled quote Prudential Treatment of crypto asset exposures I'll Leave a link to the full document in the Description if you're interested but I Will warn you it is a fairly technical Read as always the devil is in the Detail so the bis document begins with a Brief introduction wherein the authors Reveal that institutions asked for Consultation about central banks holding Cryptocurrencies in June 2022 following Conversations with stakeholders the bis

Finalized its crypto custody standards For central banks effective from 2025. Now I say stakeholders with finger Quotes because in theory this term is Meant to apply to anyone who has an Interest in central banks holding crypto Which is well everyone In practice however stakeholders is Almost always a reference to powerful Individuals and institutions never Forget that Anyways in the second part of the Document the authors break down the Structure of the cryptocacity standard And highlight six key components Group 1 Cryptocurrencies group two Cryptocurrencies infrastructure risk Redemption risk group 2 exposure limits And quote other elements so Group 1 Cryptocurrencies are any coins or tokens That are analogous to existing Assets Group 1A cryptos include any coins or Tokens that reflect real world assets Such as stocks whereas group 1B cryptos Are essentially centralized stable coins A footnote specifies that algorithmic Stable coins don't count group 2 Cryptocurrencies are any coins or tokens That are not analogous to existing Assets Group 2 cryptos includes all Quote unbacked crypto assets such as Bitcoin's BTC ethereum's eth and so on The authors specify that group 2 Cryptocurrencies carry a higher risk due

To their volatility then as you might Have guessed infrastructure risk refers To additional risks for tokenized assets Or stable coins due to the networks they Exist on for example usdc on Solana Would have a higher infrastructure risk Than usdc on ethereum because ethereum Is more secure than Solana ethereum on Also doesn't experience any outages but Let's not go there more about Solana in The description moving on now regarding Redemption risk the authors specify that This only applies to any centralized Stable coins being kept on central bank Balance sheets Before adding a stablecoin to their Balance sheets central banks must check If the stablecoin issuer is sufficiently Regulated and if it can redeem Withdrawal requests With this context in mind the group 2 Exposure limits component is Straightforward the author specified That central banks Can Only Hold up to Two percent of their balance sheets in Group 2 cryptocurrencies according to Bitcoin magazine two percent of all Central bank balance sheets equals Roughly 3.6 trillion dollars As for other elements this includes Things like disclosures around crypto Holdings any kind of crypto leverage and The liquidity of other assets on the Central bank's balance sheet why do I

Have the feeling that a central bank Somewhere will get wrecked trading BTC On 100x Leverage on some offshore Exchange Jokes Aside what you see here is a Diagram which shows how cryptocurrencies In each of the two groups are Categorized and how they should be Handled by central banks I must admit The diagram is a bit confusing but it Confirms that group 1 cryptos don't have A maximum exposure limit this is a Bigger deal than you think but I'll come Back to that later on Anywho in the third part of the standard The authors reveal which components of The crypto custody framework the Stakeholders convinced the bis to change The first of these is the infrastructure Risk add-on which was set to be fixed at 2.5 percent of the value of tokenized Assets or stable coins for instance if a Central bank has 100 million usdc on its Balance sheet then it would effectively Count this 100 million usdc as if there Was 102.5 million usdc this might sound Silly but it's supposed to ensure that Central banks are hedging the risks Associated with the networks usdc exists On Interestingly the stakeholders convinced The bis to replace this 2.5 Infrastructure risk with a quote add-on Based on any observed weaknesses in the

Infrastructure that underlies specific Crypto Assets in other words central Banks decide what the infrastructure Risk is based on the blockchain being Used this is significant because it Means that central banks could play Favorites with certain smart contract Cryptocurrencies however the wording Suggests that it will ultimately be up To authorities that is governments which Means that it will ultimately be up to The crypto lobbyists food for thought Now another interesting change the bis Made at the behest of stakeholders was To the Redemption risk component Originally this component was going to Include a basis risk test along with the Redemption risk test the tldr is that The basis risk test would have opened The door to decentralize stable coins However the stakeholders convinced the Bis to replace the basis test with Additional regulatory requirements Obviously any kind of decentralized Stablecoin will not be able to comply With regulations which therefore Disqualifies them from being held on Central bank balance sheets I can't help But be reminded of the European Union's Markets in crypto assets bill or Mica Which contained additional requirements For decentralized stable coins that Would effectively make it impossible for Them to be legal in the EU more about

That in the description moving on When it comes to group 2 exposure limits The bis initially refused to raise the Rate higher than one percent however the Stakeholders convinced the bis to Increase this limit to two percent from What I've read stakeholders were pushing For a five percent allocation threshold So two percent appears to be a Compromise If you're wondering what happens when a Central bank increases its group 2 Allocation Beyond two percent the answer Seems to be that they'll be subject to Additional Capital requirements it's not Entirely clear as to who would enforce This but like all other unelected International organizations the bis has Its ways now what's surprising is that The stakeholders managed to convince the Bis to completely drop its pre-approval Process for crypto allocation put Differently the bis wanted to have the Power to pre-approve the crypto Holdings Of central banks the stakeholders Convinced the bis to drop this Supervision instead central banks will Simply tell the bis which Cryptocurrencies they are buying now if I understand correctly the bis will have The power to override these purchase Decisions but I again suspect that this Is something that will be enforced by Regulators or rather by those who Lobby

The Regulators This ties into the fourth part of the Standard which is about the elements of Crypto custody and allocation that will Be subject to oversight The authors start by saying that the bis Will be watching the quote Implementation and effects of the crypto Custody standard once it goes live in 2025 They add that the bis will likely make Changes to the cryptocustody standards As the crypto industry evolves which Makes sense they also reveal that the Pis will be working closely with Regulators to ensure that central banks Are abiding by the rules like I said the Bis has its ways the authors then Provide a list of five areas where they Will be focusing their oversight Activities these are Statistical and Redemption risk tests Permissionless blockchains group 1B Cryptos AKA stable coins being used as Collateral Group 2 criteria and group 2 exposure Limits For statistical and Redemption risk Tests the bis will try to develop a Statistical test that will determine Which centralized stablecoins are low Risk and make this a requirement to fall Into the group 1B category if they Succeed

They will also study the appropriate Composition of stablecoin Reserves Spoiler alert the bis will probably say That all stable coins must be backed by The government debt of the region where The stablecoin issuer is based Funnily enough this is already the case With most centralized stable coins in Circulation more about the assets Backing stable coins in the description Now for permissionless blockchains the Bis will assess whether tokenized Real-world assets and stable coins that Exist on Smart contract cryptocurrencies Can be included in the group 1 category This suggests that the bis hasn't signed Off on the kinds of stable coins we're Familiar with at least not yet For group 1B kryptos those stable coins Being used as collateral the bis says That any stable coins received by Central banks as collateral will not be Counted as actual collateral however the Bis notes that it will monitor this and Could eventually allow stable coins to Be used as collateral by central banks For group 2 criteria the bis will assess What criteria will make a cryptocurrency Fall into the group 2A category context Group 2A cryptocurrencies are basically Large cap cryptos whereas group 2B Cryptocurrencies are basically small cap Cryptos naturally central banks will Have higher Capital requirements when

Holding Group 2B cryptos The bis will incentivize central banks Not to allocate more than one percent of Their portfolios to cryptocurrency by Having them all treated as group 2B Cryptocurrencies when they cross this One percent Line in the Sand this Relates to group 2 exposure limits where The authors reveal that the bis will be Open to increasing the one percent soft Limit and two percent hard limit on Central Bank crypto Holdings as the Crypto Market matures not to brag but I Predicted that central banks would soon Hold BTC on their balance sheets earlier This year more about that in the Description Anyhow the fifth and final part of the Document provides all the details about Things like crypto classification and Central Bank Capital requirements this Part is over 25 pages long and most of It is pretty boring however a few things Did catch my eye For starters the authors clarify that Nothing in the crypto custody standards Relates to Central Bank digital Currencies or cbdcs the authors note That the bis will publish cbdc custody Standards once enough of them are in Circulation to understand their Implications the authors also specify That any tokenized real-world asset or Centralized stablecoin that doesn't meet

Group 1 criteria automatically gets Lumped into group 2. the most important Group 1 Criterion is that the tokenized Asset or centralized table coin reflects The value of the asset or currency it Represents now this Criterion is Questionable because even the most Stable of stable coins can be Temporarily pushed above or below its Peg when markets are volatile not only That but the Fiat currencies which they Represent can also be very volatile This begs the question of how this Criterion will be measured another group One Criterion that caught my eye relates To the network that a tokenized asset or Stablecoin exists on the author Specified that this network must have Quote robust risk governance and risk Control policies in place This begs the question of whether smart Contract cryptos would qualify the Answer is probably yes so long as the Smart contract crypto in question has a Robust governance structure however the Moment that a cryptocurrency is governed By a small group of stakeholders then It's no longer decentralized this Governance capture of crypto projects is Unfortunately a real risk ironically Enough the authors reveal that the Aforementioned supervisors That central Banks will have to report their crypto Exposure to don't necessarily need to

Work with Regulators in their respective Jurisdictions governance and oversight For the but not for me The authors also reveal that the Infrastructure risk associated with the Network that power tokenized real-world Assets and stable coins will be set at Zero by default and will only be Increased when a central bank has reason To believe that the network is Unreliable In terms of group 2 criteria the author Specified that group 2A cryptocurrencies Must be highly liquid must have a market Cap of at least 10 billion USD and must Have at least 50 million dollars of Daily trading volume against Fiat Currencies at the time of shooting Dogecoin would fall into group 2A coming Soon central banks holding Doge In all seriousness it seems that central Banks will be required to hold 100 of The value of group 2A cryptos in their Respective Fiat currencies this is the Capital requirement I was talking about Earlier and it's one that will likely Limit how much crypto central banks are Willing and able to hold For group 2B cryptos it seems the Capital requirement for central banks Will be a whopping 12.5 x cash cushion Now on the one hand this makes sense Given that group 2B includes all small Cap altcoins but on the other hand it

Clearly discourages allocation to Anything outside of the top 10 by market Cap it also underscores the one percent Soft cap proposed by the bis Going above the two percent threshold Means that a central bank will have to Hold 12.5 times the amount of crypto it Holds in cash even if that crypto is all BTC The authors later note that any breach Of the one percent soft cap should be Quote immediately rectified Last but not least all the central Bank's crypto activities must be fully Compliant with the financial action task Force or fat F's so-called Recommendations regarding cryptocurrency You can find out about how insane those Are using the link in the description So this brings me to the big question And that's what the bis's crypto custody Standards for central banks means for The crypto Market well at first glance It's extremely bullish upon closer Inspection however it could in fact mean The end of crypto allow me to explain I'll start by reiterating that the bis Hates cryptocurrency especially stable Coins more than any other institution in Existence This is because stable coins are direct Competitors to cbdcs in some countries US dollar stable coins are seen as a Threat to National currencies and

Rightfully so the bis and other such Institutions have also claimed that Cryptocurrency creates Financial Stability risks this is true in the case Of centralized stable coins because if Everyone rushes to redeem their stable Coins for cash then stablecoin issuers Must sell all their government debt to Honor these cash withdrawals if you've Watched any of our videos about the FED You'll know that selling lots of Government debt causes its price to drop And interest rates in the economy to Rise in some cases it can result in the Situation we recently saw in the UK Where Pension funds were squeezed by Falling guilt prices So riddle me this why the hell would the Bis the literal bank for central banks Pull the biggest 180 on cryptocurrency That they possibly could well let me Remind you that central banks can hold As many stable coins as they want and Will eventually be able to hold larger Amounts of other cryptos From where I'm standing it looks like This 180 is happening because the bis Can see that not every central bank has The capacity to roll out and maintain a Secure cbdc system Four such central banks the only viable Alternative is to issue stable coins Denominated in their National currencies As such it's extremely likely that

Stablecoin issuers were among the Stakeholders consulted by the bis this Is evident from the fact that the Requirements for centralized stablecoin Issuers were lowered while decentralized Stable coins were cut out of the Equation Centralized stable coins don't want Competition now this collaboration Between central banks and stablecoin Issuers to create a de facto digital Currency is called a synthetic cbdc and It's something that's been actively Discussed by the world economic forum And others more about that in the Description Now you would think that this is bullish For the smart contract cryptocurrencies These stable coins will circulate on Given that all transaction fees will be Paid in their coins Well besides the fact that the bis isn't Sold on Smart contract cryptocurrencies This Arrangement could result in the end Of crypto consider a scenario where Central banks start issuing stable coins On ethereum logically they would have a Vested interest in ensuring that they Have a say in how ethereum operates This would create an incentive to Accumulate eth something that's allowed By the bis's cryptocustody standard now Because central banks can print money Out of thin air they would easily be

Able to acquire all the ethane need to Ensure that they have total control over The ethereum blockchain This is an outcome I've been warning About for a long time and the bis's Crypto custody standard sets the stage For exactly that If that wasn't bad enough the megabanks And asset managers also seem to have Their eyes on the prize they know that They'll soon be made obsolete by crypto That's why I believe they will soon Start buying up the crypto Stakes they Need to ensure they maintain control of The future Financial system Now the Silver Lining is that this Strategy is doomed to fail because the Fiat currencies used to purchase the Stakes in smart contract cryptos will Continue to lose value meanwhile Bitcoin Will become even more secure and Decentralized and will also be Recognized as a store of value it sounds Crazy but BTC could eventually be the Currency that secures smart contract Blockchains like ethereum at that point Crypto would be truly Unstoppable and Become everything it was meant to be I For one reckon that is inevitable [Music]


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