Basel Committee Reconsiders Crypto Capital Rules After US, UK Pushback

TLDR

• The Basel Committee is preparing to revise its crypto capital rules after opposition from the United States and the United Kingdom.
• The current rules require banks to hold capital equal to their crypto exposure, which many regulators consider too strict.
• US and UK regulators have stated they will not implement the rules as written under the 2022 Basel framework.
• Erik Thedéen said the growth of regulated stablecoins has changed the policy landscape and needs quick analysis.
• The European Union has only partially implemented the rules and excluded provisions related to permissionless blockchains.

Global bank regulators may adjust the strict crypto capital rules after the US and UK declined to implement the current framework. Erik Thedéen, chair of the Basel Committee on Banking Supervision, confirmed the committee is considering a new direction. The possible shift comes as stablecoin growth and political backing alter the crypto policy environment.

US Rejects Basel Crypto Capital Rules

The US Federal Reserve will not apply the current Basel crypto capital rules, citing unrealistic capital requirements for banks. Officials believe the 1,250% risk weight discourages participation in stablecoin and crypto markets. Therefore, the Federal Reserve prefers developing its own framework tailored to domestic needs.

The capital rules require banks to hold matching funds for every crypto asset they have under the current 1,250% weighting. This level treats stablecoins the same as the riskiest venture investments in traditional finance. The US response signals a growing divergence from the Basel Committee’s original consensus.

Erik Thedéen acknowledged that the stablecoin market’s fast growth is forcing regulators to reconsider the existing standards. “There is a strong increase in stablecoins,” he said, “and that calls for a new approach.” He confirmed the committee had already started internal discussions on the topic.

UK Signals It Will Not Adopt Existing Rules

The Bank of England has also made it clear that it will not enforce the crypto capital rules in their current form. UK officials believe the framework could stifle innovation in banking linked to regulated stablecoins and tokenized deposits. The country plans to monitor global developments before finalizing its own approach.

UK regulators argue that the rigid framework does not reflect the evolving crypto landscape or the risks posed by permissioned stablecoins. As a result, banks in the UK may receive more flexibility to offer digital asset services. This decision may create an uneven playing field between jurisdictions.

Thedéen admitted that global coordination is becoming more difficult as countries adopt diverging views on crypto asset risks. He said, “There are so many different views in this committee.” This division challenges the committee’s long-standing unity on global financial standards.

EU and Stablecoin Growth Prompt Policy Shift

The EU has partially implemented the Basel crypto capital rules but excluded key provisions covering permissionless blockchains. Lawmakers chose to focus only on elements aligned with existing EU regulatory frameworks. As such, the implementation remains incomplete across member states.

Meanwhile, regulated stablecoins have seen strong adoption in the US and other countries. Assets such as USDT and USDC are increasingly used for payments and tokenized services. The GENIUS Act recently formalized the use of regulated stablecoins in US payment systems.

Thedéen noted that the current growth in these assets has reshaped the policy debate. “What has happened has been fairly dramatic,” he stated during the FT interview. He added that regulators must respond quickly with a more realistic assessment of the risks.

Basel Committee Considers Revisions to Framework

The Basel Committee is now preparing to revise its 2022 guidance to reflect evolving market conditions better. According to Bloomberg, anonymous sources confirmed internal talks are progressing on a more bank-friendly approach. These discussions focus mainly on stablecoins and permissioned blockchain activities.

Some banks argue that the original crypto capital rules discourage participation in safe, regulated digital asset markets. As such, they seek clear standards that allow participation without excessive capital burdens. The committee is expected to publish revisions sometime next year.

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