Wall Street trade groups urge the Basel Committee to pause strict crypto banking rules

Eight major financial industry associations wrote an email to global regulators asking them to pause the rollout of strict crypto banking rules. They claimed that the laws could lock traditional lenders out of a $2.8 trillion digital asset market.

The trade groups, including the Global Financial Markets Association, Institute of International Finance, Financial Services Forum, Bank Policy Institute, and the Association for Financial Markets in Europe, sent a letter to the Basel Committee on Banking Supervision (BCBS) on Tuesday. 

The groups asked regulators to “temporarily pause” the implementation of capital rules set to take effect in January 2026.

The Basel Committee, made up of regulators and central banks from the world’s major financial hubs, adopted a framework in 2022 to govern how banks should manage and disclose risks tied to crypto exposure, imposing capital requirements and limits on digital asset holdings.

Financial policy groups ask BCBS to hold on the legislation for now

In the letter, the trade groups propounded that the rules are outdated and overly harsh with their “punitive capital treatments,” which could make crypto activities uneconomical for banks. As reported by Cryptopolitan, Standard Chartered executive Bill Winters said banking institutions feel “left behind by private credit firms” in crypto.

According to the groups, this will inevitably push digital assets into less-regulated parts of the financial sector.

“The Cryptoasset Standard’s restrictive qualification standards, combined with otherwise punitive market and credit risk capital treatments, effectively make it uneconomical for banks to meaningfully participate in the cryptoasset market,” they wrote.

The associations mentioned BCBS’s laws have ramified approaches among national regulators. They said policies in 2025 look very different from those in place when the standards were first drafted in 2022.

Some jurisdictions, they noted, have chosen not to adopt the most conservative aspects of the Basel standards, such as higher risk weights for assets dependent on whether they are based on permissioned or permissionless ledgers. Others that leaned toward a more pro-innovation stance have not announced any plans or timelines for implementation at all.

This inconsistent rollout, the letter read, threatens the success rate of implementing a minimum global standard that levels the playing field, reduces cross-border risks, and prevents financial fragmentation, or in a nutshell, the Basel standards.

“Pausing implementation, and conducting an appropriate redesign and recalibration of the Cryptoasset Standard, would further the overall mission of the BCBS,” the letter read.

Standards formed from the fallout from crypto company crashes

The Basel crypto rules were drafted in response to high-profile failures that almost wiped out the digital asset industry in 2022. The collapse of Luna/Terra and the implosion of FTX left millions of investors facing losses, purportedly caused by widespread misconduct.

“The capital rules were brought in when a majority of players were not from traditional finance or banking, following major crashes like Luna and FTX,” said Musheer Ahmed, founder of Hong Kong advisory firm Finstep Asia.

Under the Basel framework, banks must assign higher risk weights to digital assets compared with traditional holdings. Bitcoin and Ethereum, the two largest cryptos by market capitalization, face a 100% risk weight. Yet, many other tokens fall into the so-called “Group 2” category, subject to a 1,250% risk weight, far higher than requirements for corporate bonds or equities.

The associations offered several recommendations to improve the rules, which included eliminating the distinction between permissioned and permissionless ledgers when determining eligibility for lower capital requirements. 

They also advised BCBS to revise classification conditions to focus on enforceability and settlement finality rather than technical attributes, and to differentiate between regulated and unregulated stablecoins.

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