Senate Republicans are pressuring U.S. bank regulators to overhaul how capital requirements are calculated for digital assets, arguing that current international standards amount to a “de facto ban” on bank participation in the sector.
In a letter sent last week, Senator Cynthia Lummis and five colleagues urged the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) to develop a new, technology‑neutral framework that reflects the specific risk profile of digital assets.
The letter was addressed to Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill, and Comptroller of the Currency Jonathan Gould, and was timed to land just ahead of their appearance before the House Financial Services Committee on Thursday.
Senators target Basel’s 1,250% risk weight
The senators took direct aim at standards set by the Basel Committee on Bank Supervision, which assigns a 1,250% risk weight to certain digital assets. Under that rule, banks must hold capital equal to the full value of those assets on their balance sheets.
Such a high risk weight is far more stringent than for most other asset classes and, in practice, makes it uneconomical for regulated banks to hold many digital assets or to scale up custody and related services.
Industry advocates and some lawmakers have described the effect as a backdoor prohibition, even as non‑bank firms and public companies expand their exposure. A report earlier this year showed corporate treasuries holding more than 1.1 million Bitcoin, then valued at over $78 billion. More recent figures indicate public companies alone now control positions worth roughly $85.5 billion.
The Basel Committee operates under the umbrella of the Bank for International Settlements and sets key prudential standards for 45 central banks and supervisory authorities worldwide, including those in the United States. While Basel rules are not self‑executing, U.S. regulators typically align domestic requirements closely with its framework.
Call for technology‑neutral rules
Lummis, joined by Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted, argued that U.S. capital rules should be technology‑neutral, allowing banks to engage in digital asset activities while maintaining robust risk management.
They cited a joint statement issued in March by federal banking agencies, which clarified that tokenized securities should receive the same capital treatment as their non‑tokenized counterparts. The senators said this principle should extend beyond tokenized versions of traditional instruments to cover a wider range of digital assets.
Their letter comes as Congress debates legislation that would expand banks’ authority to conduct on‑balance‑sheet operations involving digital assets. The lawmakers warned that any such expansion will require consistent and transparent capital guidance from regulators to avoid regulatory arbitrage and uncertainty in the banking system.
Regulatory tone shifts toward risk‑based tailoring
The senators’ appeal coincides with a noticeable shift in rhetoric from financial regulators. In prepared remarks for the House hearing, officials including Bowman and Hill stressed the need to tailor rules to actual risk and to remove unduly burdensome requirements, signaling openness to revisiting older or more rigid standards.
Recent agency moves appear to support that direction. Banking regulators have moved to drop “reputational risk” as a stand‑alone basis for examinations, a change widely interpreted as an effort to curb the practice critics described as “debanking” lawful digital asset businesses.
The Federal Reserve has also withdrawn earlier guidance that effectively required banks to seek prior approval for nearly any digital asset‑related activity. Scrapping that hurdle is seen as a significant step toward allowing banks to experiment with blockchain, custody, and tokenization initiatives under existing supervisory frameworks.
These changes, combined with the agencies’ earlier clarification on tokenized securities, suggest a broader reassessment of how digital activity fits within traditional prudential rules.
Capitol Hill weighs broader digital asset framework
The regulatory debate is unfolding alongside legislative efforts, most notably the CLARITY Act in the Senate. The bill aims to create a comprehensive framework for digital assets, including rules that could influence how banks handle custody, trading, and settlement.
A group of 160 former national security officials recently endorsed the CLARITY Act, arguing that regulatory certainty is a matter of U.S. economic and national security. They warn that prolonged ambiguity could push liquidity, innovation, and critical financial infrastructure to offshore venues.
Any progress on the CLARITY Act could shape how agencies respond to the capital issue raised by Lummis, Hagerty, Sullivan, and their colleagues. Regulators will be watching for signals from Congress on the desired balance between fostering innovation and safeguarding the banking system.
What traders and banks are watching next
Traders, banks, and digital asset firms will be focused on several near‑term developments:
- Formal responses or proposed rulemakings from the Federal Reserve, FDIC, and OCC on Basel’s 1,250% risk weight and broader digital asset capital treatment.
- The trajectory of the CLARITY Act and related digital asset bills in the Senate.
- Any follow‑up hearings or guidance from the House Financial Services Committee that clarify how far regulators are prepared to diverge from existing Basel standards.
The convergence of direct pressure from Senate Republicans, deregulatory signals from agency leadership, and active legislative efforts suggests that U.S. capital rules for digital assets are now firmly in play. Whether that leads to incremental adjustments or a more comprehensive overhaul will depend on how regulators interpret their mandates in the months ahead.
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