Key Takeaways
A group of six Republican senators is pressing U.S. bank regulators to scrap a capital rule they say functions as a de facto ban on banks holding Bitcoin.
Six Republican senators urged the Federal Reserve, FDIC and Office of the Comptroller of the Currency in a May 27 letter to replace the Basel Committee's 1,250% risk weight on digital assets with a calibrated capital framework, arguing the current treatment makes bank participation in Bitcoin markets economically impractical. The letter, addressed to Fed Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill and Comptroller Jonathan Gould, targets a rule that requires banks to hold capital equal to 100% of their Bitcoin exposure — a $100 million capital charge on a $100 million position under the 8% minimum capital ratio, rising to roughly $150 million for banks with a 12% internal CET1 target.
"The classification was not derived from the calibrated assessment of the actual risk profile of digital assets," the senators wrote. "This framework appears to be a blanket penalty assigned by asset category as a de facto ban on banks holding this asset class in direct tension with a technology-neutral approach."
The 1,250% risk weight, part of the Basel cryptoasset standard developed after the 2022 market collapse, assigns Bitcoin the same capital treatment as opaque securitization tranches despite trading in transparent global markets. The senators found their sharpest argument in a March 2026 interagency FAQ on tokenized securities, in which the Fed, FDIC and OCC held that eligible tokenized securities should receive the same capital treatment as their non-tokenized equivalents. If technology-neutral logic applies to tokenized Treasuries, the senators argued, it should extend to native digital assets whose volatility and operational risks are measurable through existing Basel frameworks.
The Basel rule and the CLARITY Act
The push comes as the Senate Banking Committee advanced the CLARITY Act on May 14 by a 15-9 vote, sending the market structure bill to the Senate floor. Treasury Secretary Scott Bessent has projected a signing by July 4. The legislation would give banks a clearer statutory role in digital asset markets, but the senators argue that legislative permission without capital efficiency leaves banks holding a permission slip they cannot afford to use.
The Basel Committee agreed in November 2025 to expedite a targeted review of its cryptoasset standard, with Chair Erik Thedéen acknowledging the global rules need reworking after the U.S. and UK both declined to implement the current framework. A coalition of major financial industry groups wrote to Basel in August 2025 requesting a pause and revisions, arguing the standard would make meaningful bank participation uneconomical.
What a calibrated framework would unlock
If regulators respond by proposing a calibrated framework for liquid digital assets, the capital required on $100 million of Bitcoin exposure could fall from the current $100 million-$150 million range to roughly $8 million-$36 million under a 100%-300% risk-weight band. At that level, bank market-making, custody, prime brokerage and structured crypto products become viable lines of business, compressing spreads and moving banks from service providers to balance-sheet participants.
If the 1,250% treatment remains, Bitcoin access stays routed through nonbanks and ETF wrappers. U.S.-traded spot Bitcoin ETFs saw roughly $4.4 billion in outflows from May 15 to June 3, underscoring that institutional access has already routed around bank balance sheets.
The three regulators the letter addresses have each moved toward crypto permissiveness since early 2025. The OCC reaffirmed in March 2025 that national banks may engage in crypto custody and stablecoin activities. The FDIC rescinded its prior notification requirement the same month. The Fed withdrew its guidance on crypto assets and dollar tokens in April 2025. All three opened the door to crypto activity and left the Bitcoin capital question untouched.
The letter raises the political cost of inaction while Congress is actively writing the market structure rules that will govern bank participation in digital assets for the next decade. Legal authorization to hold Bitcoin means little if the capital charge required to do so makes the position uneconomic from the first day it hits the balance sheet.
This article is for informational purposes only and does not constitute investment advice.
