- Pro-crypto senators push for new bank capital rules for digital assets.
- Lawmakers say Basel’s 1,250% crypto risk weight is overly punitive.
- The effort comes as the CLARITY Act moves closer to a Senate vote.
As the CLARITY Act nears its decisive moment, a group of pro-crypto Senators has begun pushing for the creation of a capital framework for banks interested in offering crypto-related activities.
Senators Challenge Basel’s Crypto Capital Rules
In their letter to Congress, the lawmakers, including Senator Cynthia Lummis, Senator Bill Hagerty, Senator Ted Budd, Senator Dan Sullivan, Senator Bernie Moreno, and Senator John Husted, emphasized the need to revise the untenable Basel capital standards imposed on banks for the balance sheet treatment of digital assets.
Under the Basel Committee framework, crypto assets such as Bitcoin are considered high-risk and would require banks that hold them to maintain a dollar of capital for every dollar of crypto exposure. The measure effectively limits how much crypto banks can hold, keeping the numbers below 1% of their core capital or at most 2 percent.
Furthermore, it imposed a punitive 1,250% risk weight on banks’ digital asset portfolio, meaning they had to hold capital directly equivalent to their crypto exposure.
“This classification was not derived from the calibrated assessment of the actual risk profile of digital assets, however,” argued the lawmakers. This framework appears to be a blanket penalty assigned by asset category as a de facto ban on banks holding this asset class in direct tension with a technology-neutral approach.
In addition, Michelle Bowman, the Vice Chair for Supervision at the Federal Reserve, has maintained since 2025 that the agency will not adopt the Basel risk weights, citing that they are “actually not very realistic.”
Capital Rules Must Catch Up to CLARITY Act
Prior to the above admission by Chair Bowman, banking and financial market coalitions had written to the BCBS (Basel Committee on Banking Supervision) asking for a pause and revision of the punitive and untenable capital framework.
Although the BCBS acknowledges the need for an urgent review of the aspects pertaining to bank crypto exposure, there is yet to be any significant effort in that direction. This absence of action could lead to the failure of ongoing market structure legislation principles to align with the prevailing capital requirements.
The market structure bill, which could be passed within the next few months, allows banks to provide several balance-sheet activities with digital assets. These activities would eventually need clear capital prescriptions, which if not available, could jeopardize regulatory efforts and market stability.
Therefore, the Senators urge the Basel Committee to expedite a new capital framework for digital asset activities, which will accurately reflect both the risks and opportunities. Also, the new framework must be as technology-neutral as possible in order to enhance banking participation in crypto activities.
Amid these talks, Senators are optimistic about the passage of the CLARITY Act, which is about the most important digital asset legislation at the moment. Although Treasury Secretary Scott Bessent projects its signing by July 4, Senator Lummis expects the legislation to have hit the Senate floor by that date.
