tl;dr
Eight major trade groups have urged the Basel Committee on Banking Supervision to delay implementing crypto asset capital standards set for January 2026, arguing the proposed rules impose excessively high capital requirements—up to 1,250% for some crypto assets—compared to traditional investments. T...
Eight prominent trade groups have called on the Basel Committee on Banking Supervision to "temporarily pause" the implementation of crypto asset capital standards slated for January 2026. These associations warn that the proposed capital requirements—some as high as 1,250% for certain crypto assets—are disproportionately punitive compared to traditional investments such as corporate bonds.
Major financial industry groups, including the Global Financial Markets Association and the Institute of International Finance, argue that the current Basel rules would make crypto activities economically unviable for banks, potentially pushing the $2.8 trillion digital asset market outside regulated financial institutions altogether. Although Basel standards are non-binding, their adoption by member countries significantly influences banks' ability to compete in crypto markets globally.
Musheer Ahmed, founder of advisory firm Finstep Asia, highlights the risk of fragmented global regulation, warning that inconsistent implementation could result in a bifurcated market and hinder progress towards establishing minimum regulatory standards. The rules, developed in 2022 amid the fallout from crypto crises like Luna/Terra and FTX, no longer reflect today’s evolving, more regulated environment dominated by traditional financial institutions.
Under the current framework, Bitcoin and Ethereum face a 100% risk weight, while many other crypto assets are penalized with a 1,250% capital charge—far exceeding requirements for traditional assets. Furthermore, the rules impose exposure limits that restrict banks' crypto holdings to a mere 1% of Tier 1 capital. This is despite significantly higher trading volumes for BTC and ETH compared to the average volume for S&P 500 companies, underscoring the disproportionate regulatory treatment.
The trade groups acknowledge recent technical amendments by the Basel Committee in July 2024 but maintain that these tweaks do not resolve the underlying structural issues of the 2022 framework. Ahmed stresses that with growing institutional involvement, risk management could align more closely with traditional finance, making a regulatory review both necessary and timely.
In their letter, the associations emphasize the historical role of innovation in strengthening financial markets and caution against unfairly restricting banks from adopting distributed ledger technology, advocating for balanced regulation that supports stability without stifling growth.