Regulators' March 19 Proposal Ignores Bitcoin, Creating Capital Uncertainty
US banking regulators have created a significant regulatory vacuum for banks seeking to engage with Bitcoin. A sweeping proposal released on March 19 to overhaul bank capital requirements, known as the Basel III endgame, contained no mention of Bitcoin, crypto, or digital assets. The omission by the Federal Reserve, FDIC, and the Office of the Comptroller of the Currency leaves the largest US banks without a clear framework for the capital they must hold against Bitcoin-related holdings, custody services, and lending activities.
This lack of clarity injects substantial uncertainty into the market. Without explicit rules, banks are left to interpret how existing capital categories apply to Bitcoin exposures, a process that increases legal risk and deters institutional participation. The ambiguity stands in contrast to recent regulatory actions providing clear guidance for other asset classes, amplifying concerns within the digital asset industry.
Formal Challenge Warns of 1,250% Risk Weight Threat
In response to the regulatory silence, Pierre Rochard, CEO of The Bitcoin Bond Company, submitted a formal comment to the agencies on March 29. He argued that regulators cannot finalize a rule that implicitly determines Bitcoin's capital treatment without providing an explicit framework and supporting evidence. The core of the issue is the potential application of the Basel Committee on Banking Supervision's global standard for crypto-assets, known as SCO60.
This international framework imposes a prohibitive 1,250% risk weight on unbacked crypto-assets, including Bitcoin. Applying such a standard would make it economically unviable for regulated banks to hold Bitcoin on their balance sheets or offer related derivative and lending products. Rochard's challenge contends that imposing this treatment without due process and public comment could be vulnerable to legal challenges and would effectively block banks from the Bitcoin market.
Contradictory Guidance Stifles Bank Participation
Rochard highlighted a key inconsistency in the regulators' approach. On March 5, the same agencies issued a clear FAQ on tokenized securities, stating that the capital framework is “technology neutral” and that these assets should receive the same capital treatment as their non-tokenized equivalents. This provided a clear path for banks to engage with tokenized traditional assets.
The absence of similar guidance for Bitcoin creates a stark contrast that discourages innovation and investment. As banks navigate the uncertainty, the potential for unlocking significant liquidity for Bitcoin-related activities remains stalled. Rochard voiced this frustration in a public comment, stating:
The fiat system should stop sabotaging itself. Bitcoin banking rules would improve bank net interest margins and lower interest rates for borrowers.
— Pierre Rochard, CEO of The Bitcoin Bond Company.
