Banks Clash Over Global Crypto Rules

Several global financial trade associations are calling on the Basel Committee on Banking Supervision (BCBS) to reconsider the Crypto Asset Exposure Standard (SCO60) before its January 2026 effective date.

The associations said in a Tuesday (Aug. 19) letter to the BCBS that the standard’s capital treatment of crypto assets is excessively conservative and overly punitive, misaligned with actual risks and inconsistent with current market risk management practices, the Bank Policy Institute (BPI), which is one of the signers of the letter, said in a Tuesday press release.

Together with the letter, the associations issued a report highlighting the “transformative potential” of distributed ledger technology in capital markets, according to the release.

The BCBS rules require “steep” capital surcharges for banks holding cryptocurrencies, Bloomberg reported Tuesday.

The rules were adopted in 2022 at a time when there were upheavals and scandals in the crypto market, according to the report.

Today’s environment is different, with crypto entering the mainstream as President Donald Trump pushes for legislation favorable to the industry and global banks consider involvement in custody, trading and stablecoin issuance, per the report.

In the letter to BCBS, the associations wrote that the standards make it uneconomical for banks to participate in the crypto asset market and that the direct involvement of banks could provide consumer protection and risk management.

“The prudential framework for those markets should not discourage participation by imposing overly punitive capital requirements that are inconsistent with actual risks,” the letter said. “If banks choose to participate, they should be able to do so within a technology-neutral framework that is proportionate and risk-sensitive.”

When proposing crypto guidance for banks in June 2022, BCBS said banks should be more cautious when setting aside capital to cover risks from unbacked cryptocurrency assets.

At that time, concerned about a lack of regulation in the crypto sector and the collapse of the TerraUSD stablecoin, BCBS said cryptocurrencies that aren’t backed by traditional currencies should be approached conservatively.

“Given the rapid evolution and volatile nature of the crypto asset market, the committee will continue to closely monitor developments during the consultation period,” BCBS said in a June 2022 report.