Senate Republicans Push Regulators to Revise Bank Capital Rules for Digital Assets
A coalition of US Senate Republicans is demanding that federal banking regulators tear up the current rulebook on bank capital rules for digital assets, warning that existing requirements are functioning less like prudential regulation and more like an outright ban on bank participation in the crypto sector.
Senators Cynthia Lummis, Bill Hagerty, Dan Sullivan, Bernie Moreno, Jon Husted, and Ted Budd authored a letter to US banking authorities requesting the establishment of a new framework to govern how banks engage with digital asset markets. The letter lands as Washington’s broader crypto legislation push reaches a critical juncture.
At the heart of the senators’ complaint is the Basel Committee’s 2022 crypto capital framework, which assigned a 1,250% risk weight to Bitcoin and several other digital assets. The senators argued that this classification was not derived from a calibrated assessment of the actual risk profile of digital assets. The math, they pointed out, is punishing: a 1,250% risk weight, when multiplied by the 8% minimum capital ratio, produces a capital requirement equal to 100% of the exposure, meaning banks would need to hold as much capital as the value of any digital assets they hold. For most institutions, that makes participation economically impossible.
The lawmakers did not dismiss the risks that come with cryptocurrency exposure. They acknowledged the threats cryptocurrencies pose but stated that these risks are measurable and can be managed using tools that already exist within the banking system’s risk management architecture. They also took aim at how crypto assets are being characterised by regulators, arguing the current treatment fails to account for the reality that many of these assets trade in transparent, highly liquid markets around the world.
The letter called on regulators to implement a framework based on, to the extent possible, a technology-neutral approach that gives banks the authority to participate meaningfully in digital asset markets. The senators pointed to recent regulatory guidance on tokenized securities as a model worth extending to other crypto assets, stating that capital treatment should reflect the risk characteristics of the underlying asset, not the technology used to record ownership.
The push to overhaul bank capital rules for digital assets comes as the CLARITY Act picks up speed in the Senate. The bill has been placed on the Senate calendar, and Senator Lummis has indicated she hopes to secure a floor vote before the August recess. The legislation, which aims to establish a comprehensive regulatory framework for digital asset markets, has drawn strong opposition from some corners of traditional finance. JPMorgan CEO Jamie Dimon has been vocal about his opposition to provisions in the bill, even as crypto-aligned advocacy groups mobilise in support of its developer protections.
Senate Banking Committee Chairman Tim Scott has framed the push for clearer digital asset rules as both a market structure issue and a strategic economic policy question, arguing that regulatory uncertainty has already pushed developers, entrepreneurs, and investment activity overseas. The senators’ letter on bank capital rules for digital assets reinforces that message, making the case that without reform, US banks will remain on the sidelines of one of the fastest-growing sectors in global finance.
