Senators call Basel crypto rules a 'de facto blanket ban

U.S. senators have urged financial regulators to reconsider their strict capital rules for banks holding Bitcoin and other crypto assets.

The letter was signed by Republican senators, including Dan Sullivan, Cynthia Lummis, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted.

The lawmakers said the current '1,250 risk weight' on Bitcoin was 'punitive.' The Basel Committee on Bank Supervision published prudential capital standards for the on-balance sheet treatment of digital assets like bitcoin in 2022 and assigned a 1,250% risk weight—the most punitive classification in the capital framework.

This meant that for every $1 of crypto asset held by a bank, they should set aside $1.25 as an emergency reserve. For comparison, cash or Treasury bonds carry 0% risk weight because they are deemed 'safe.' Mortgages attract about 50% risk weight, meaning BTC and crypto's 1,250% weighting tops the framework.

For the senators, this amounted to a 'de facto blanket ban' on banks holding crypto assets.

This framework, the lawmakers argued, amounts to a blanket penalty assigned by asset category—a de facto ban on banks holding this asset class, in direct tension with a technology-neutral approach.

The lawmakers asked the Federal Reserve, the FDIC, and the OCC to apply similar bank capital guidelines—akin to those used for tokenized stocks—to other digital assets.

Reacting to the news, Jeff Walton, the chief risk officer at Bitcoin treasury firm Strive, called the push the potential final regulatory unlock. "The most important final regulatory hurdle for Bitcoin is Basel risk weightings. If this changes, the door to rating agencies & institutional capital holding BTC gets kicked open," he said.

Crypto assets—and BTC in particular—have notched some regulatory wins in recent years, from ETF wrappers to direct trading via banks and brokerages like JPMorgan and Morgan Stanley. There has also been a push to include them as alternative investments in retirement funds and 401(k)s, despite some opposition. Perhaps the Basel risk weighting reform and clearer tax treatment could smooth the path to broader adoption.