Wall Street Banks Urge Basel Committee to Revise Stringent Crypto Capital Rules

A coalition of prominent Wall Street financial associations is actively engaging global banking regulators, advocating for a significant revision or temporary halt to the stringent capital rules proposed for cryptocurrency exposure. These impending standards, slated for implementation in January 2026 by the Basel Committee on Banking Supervision (BCBS), are contended to be overly burdensome, potentially excluding traditional financial institutions from the rapidly expanding $2.8 trillion digital asset market and inadvertently driving activity towards less regulated sectors. This strategic push underscores a critical juncture for the integration of digital assets into mainstream finance, balancing innovation with prudential oversight.

• Prominent Wall Street financial associations are urging global banking regulators to revise or halt strict capital rules for crypto.
• These rules, set by the Basel Committee on Banking Supervision (BCBS), are due for implementation in January 2026.
• The associations argue the standards are excessively burdensome, potentially excluding traditional finance from the digital asset market.
• There is concern that these regulations could inadvertently push digital asset activity into less regulated sectors.
• This advocacy highlights the ongoing challenge of integrating digital assets into mainstream finance while ensuring oversight.

Industry Concerns Over “Punitive Capital Treatments”

The core of the associations’ concern, articulated in a letter to the BCBS, centers on what they term “punitive capital treatments.” These regulations, they argue, render participation in the crypto asset market economically unviable for banks. This perspective is echoed by industry executives, such as Standard Chartered’s Bill Winters, who noted traditional banking institutions feel sidelined by private credit firms in the crypto domain. The groups emphasize that such restrictive measures risk pushing significant digital asset activity into less supervised areas of the financial ecosystem, thereby undermining financial stability goals.

Understanding the Basel Crypto Framework

The current Basel crypto framework, adopted in 2022, was largely a response to the tumultuous events of that year, including the high-profile collapses of Luna/Terra and FTX, which exposed significant misconduct and investor losses within the digital asset sector. In response, the BCBS imposed capital requirements and limits on digital asset holdings for banks. Under this framework, mainstream cryptocurrencies like Bitcoin and Ethereum are assigned a 100% risk weight, while many other tokens fall into a “Group 2” category, subjected to an exceptionally high 1,250% risk weight—significantly exceeding capital requirements for traditional assets like corporate bonds or equities.

Inconsistent Global Implementation

Furthermore, the industry groups highlight a growing divergence in how national regulators are adopting these standards. They observe that policies in 2025 differ considerably from the original 2022 drafts. Some jurisdictions have opted not to implement the most conservative aspects of the Basel standards, such as higher risk weights based on distinctions between permissioned and permissionless ledgers. Others, embracing a more pro-innovation stance, have yet to announce implementation plans. This inconsistent global rollout, the associations contend, undermines the BCBS’s stated objective of establishing a minimum global standard that promotes a level playing field, mitigates cross-border risks, and prevents financial fragmentation.

Proposed Revisions for a Balanced Framework

To rectify these perceived shortcomings and foster a more integrated and secure digital asset landscape, the associations have proposed several key revisions. These include eliminating the distinction between permissioned and permissionless ledgers when determining eligibility for lower capital requirements, arguing for a focus on enforceability and settlement finality over technical attributes for asset classification, and advocating for clear differentiation between regulated and unregulated stablecoins. A temporary pause in implementation, coupled with a redesign and recalibration of the Cryptoasset Standard, is viewed as essential to aligning the framework with the broader mission of the BCBS.