Crypto treasury executives are pressing the Basel Committee on Banking Supervision to revise the 1,250% risk weight applied to Bitcoin and other cryptocurrencies under the Basel III framework. This high capital requirement mandates banks to back every Bitcoin on their balance sheets with an equal value of approved collateral, making it significantly more expensive than holding traditional assets like cash or gold, which carry a 0% risk weight.
Industry leaders argue this capital rule discourages banks from holding digital assets, negatively impacting return on equity and overall profitability. They contend that if the U.S. aims to be a global crypto hub, banking regulations must adapt.
The Basel Committee initially proposed these high risk weightings in 2021, placing cryptocurrencies in the highest risk category. The finalized capital requirements in 2024 drew substantial criticism from the crypto sector. Some view these rules as a subtle method to suppress crypto activity by making it prohibitively expensive for banks.
However, recent signals suggest a potential shift. The committee has reportedly considered easing capital requirements amidst the stablecoin market's growth. The chair of the BCBS also indicated a need for a "different approach" to the 1,250% risk weight, signaling possible changes to collateral requirements.