Key Takeaways:
Senate Republicans are pressing US banking regulators to replace a 1,250% risk weight on digital assets they say functions as a de facto ban on banks holding crypto.
Senator Cynthia Lummis led five Republican colleagues in a May 27 letter to Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chairman Travis Hill and Comptroller of the Currency Jonathan Gould, urging "fair capital treatment for on-balance sheet treatment of digital assets," according to a statement from Lummis's office.
"The Basel Committee on Bank Supervision published prudential capital standards for the on-balance sheet treatment of digital assets like bitcoin in 2022 and assigned a 1,250% risk weight — the most punitive classification in the capital framework," 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."
The letter commended the agencies' March guidance that tokenized securities would generally receive the same capital treatment as traditional securities, but urged regulators to extend that principle across other digital asset activities. The senators argued that capital frameworks should reflect both risks and opportunities, and that outdated standards could push activity outside supervised banking channels.
The push comes as the Senate prepares to debate the Digital Asset Market Clarity Act, which would define how the Securities and Exchange Commission and Commodity Futures Trading Commission regulate crypto markets. Senate Banking and Agriculture Committees have passed their own versions, and the full chamber must reconcile the bills. The legislation risks being reintroduced next session if it fails to pass before the November midterms.
The Basel Committee sets international banking standards for capital adequacy, with members including the Fed and other central banks from major economies. The senators said US regulators should adopt a technology-neutral approach rather than applying what they called a blanket penalty on digital assets.
Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd and Jon Husted also signed the letter. The group said any proposed capital treatment "should accurately reflect the opportunities and risks of digital assets" and give banks authority to participate meaningfully in digital asset markets.
The CLARITY Act would authorize banks to use digital assets and blockchain for payments, lending, custody and trading. JPMorgan Chase CEO Jamie Dimon has opposed the current version, arguing it lacks sufficient safeguards for stablecoins and anti-money laundering compliance.
Bowman, Hill and Gould are scheduled to testify before the House Financial Services Committee on Thursday, where their testimony could shape how agencies approach digital asset capital treatment in coming months.
The senators stressed that agencies must establish capital guidance before banks receive broader authority under the pending legislation. "Crypto legislation under consideration in the Senate would undoubtedly require capital guidance," they said, urging regulators to begin work on a new framework.
This article is for informational purposes only and does not constitute investment advice.
