Minimum Capital Requirements are regulatory stipulations that mandate financial institutions, including those operating within the digital asset sector, maintain a specified amount of liquid capital. This capital serves as a buffer to absorb potential losses and safeguard against insolvency, protecting depositors and market stability.
Mechanism
These requirements are typically calculated based on an institution’s risk-weighted assets, encompassing various categories of exposure such as credit risk, market risk, and operational risk. For firms dealing with crypto assets, calculations include the unique volatility and specific operational hazards associated with these digital instruments.
Methodology
The application of minimum capital requirements functions as a prudential regulatory tool to preserve financial system stability and market participant confidence. This framework dictates that firms must possess sufficient financial buffers to withstand adverse market movements or operational disruptions, thereby mitigating systemic contagion risk within the broader financial ecosystem.
Pakistan's new regulatory framework and invitation for licensed crypto firms establishes a structured pathway for digital asset integration, enhancing market stability and institutional participation.
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