Key Takeaways
- •Basel’s upcoming crypto capital rules are facing resistance from major regulators, especially over the treatment of stablecoins.
- •The U.S. Federal Reserve and Bank of England say they will not implement the framework in its current form.
- •Banks argue the rules make crypto participation economically unrealistic and are lobbying for revisions.
Regulatory Resistance to Basel's Crypto Capital Rules
The Basel Committee on Banking Supervision is facing significant pressure to revise its upcoming crypto capital rules. This comes after major regulatory bodies, including the U.S. Federal Reserve and the Bank of England, have indicated they will not adopt the framework in its current state.
The Shifting Focus: From Bitcoin Volatility to Stablecoin Concerns
Initially, Basel's proposal was drafted with a primary focus on the volatility of cryptocurrencies like Bitcoin and Ethereum. However, the digital asset landscape has evolved, with stablecoins now presenting a more significant point of contention. While Basel's framework still categorizes stablecoins under the general crypto umbrella, regulatory bodies in the United States and the United Kingdom have expressed reservations, arguing that stablecoins do not exhibit the same speculative characteristics as other digital tokens.
This divergence in perspective has led Basel Chairman Erik Thedéen to acknowledge the need for a reassessment, admitting that the existing model no longer accurately reflects the views of regulators or banks on digital assets.
Industry Concerns: Rules Hamper Crypto Market Participation
Financial institutions have also voiced strong opposition to the proposed rules, warning that they would effectively preclude banks from engaging with the crypto market. The requirements, slated to be implemented on January 1, 2026, assign a 1,250% risk weight to volatile assets like Bitcoin. This would necessitate banks holding $1 of capital for every $1 worth of crypto, a measure banks contend is not protective but rather makes participation economically unviable.
Breakdown in Global Consensus on Crypto Regulation
A critical development is the stance taken by influential monetary authorities. The U.S. Federal Reserve has stated it has no intention of implementing the Basel framework, with Vice Chair Michelle Bowman describing it as "very unrealistic." Similarly, the Bank of England has signaled its disinclination to enforce the rules as they are currently written.
With the United States and the United Kingdom opting out, the universal applicability of the Basel model is now in question, potentially undermining its status before its official launch.
Implications for Worldwide Crypto Regulation
For years, the Basel Committee has set risk guidelines that have been widely adopted by major economies. The current debate over crypto capital rules marks a significant instance where leading regulators are openly diverging from the established blueprint.
Thedéen recognizes the challenges in revising these rules, not due to a lack of agreement on the need for crypto oversight, but because of differing views on the appropriate regulatory approach for various types of crypto assets.
The ongoing discussion is shifting from whether crypto should be integrated into the banking system to how to regulate it effectively without imposing the same risk classifications on assets like Bitcoin, Ethereum, and stablecoins.