Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at the Wall Street groups which are urging Basel Committee to pause its 1,250% crypto capital requirement.
Basel Committee Outdated Crypto Framework
A number of Wall Street groups have urged the Basel Committee to pause its 1,250% crypto capital requirements. They note that the 2022 framework is outdated and that banks face punitive rules on tokenized assets as a result of this. Included within the major financial trade association are the Global Financial Markets Association and the Institute of International Finance. They have formally requested the Basel Committee on Banking Supervision to place a pause on the framework.
In a letter sent on August 19 the group argued that the 2022 framework has become obsolete due to rapid developments in distributed ledger technology. This coincides with the explosion of regulated digital asset markets since its adoption. The coalition’s “Impact of Distributed Ledger Technology in Capital Markets” report highlights that the current rules are “uneconomical for banks to meaningfully participate” in crypto markets. They also noted how the rules are creating a bifurcated financial system where digital assets operate largely outside traditional banking supervision. They gave examples such as tokenized U.S. Treasury securities receiving punitive 1,250% risk weights simply for existing on public blockchains.
The group have also thrown criticism at the Basel framework’s rigid distinction between permissioned and permissionless ledgers. They argue this creates an arbitrary “cliff-effects” where otherwise low-risk assets face massive capital requirements. With the current rules the tokenized government securities on public blockchains receive the same punitive treatment as speculative cryptocurrencies despite backing by U.S. Treasury bonds.
Within the letter the group have recommended that the Basel framework eliminates permissioned versus permissionless ledger distinctions for Group 1 crypto asset eligibility, noting that risk should focus on the underlying asset rather than blockchain infrastructure. They also propose removing the “infrastructure risk add-on” for Group 1 cryptoassets as unnecessary and inconsistent with technology neutrality principles.
A number of banking groups have also challenged the current 1% and 2% exposure limits for Group 2 cryptocurrencies, calling them “too restrictive” and featuring punitive cliff effects that discourage regulated entities from offering crypto services. These restrictions will end up pushing demand solely towards those outside of the banking institutions which operate outside traditional regulatory oversight.
April 2025 data shows that Group 2a cryptoassets like Bitcoin and Ethereum trade with higher volumes than many large-cap equities and major foreign exchange pairs, with observed volatility suggesting much lower appropriate risk weights around 54%. Therefore questions have been raised over the empirical justification for 100% capital risk weights on these assets.
While these questions remain, Wall Street continue to embrace crypto via a multitude of channels. Corporate treasuries now control over $28 billion worth of Ethereum and have recently pitched Manhattan investors on Ethereum as tomorrow’s financial infrastructure foundation. JP Morgan have also launched their own JPMD digital deposit token on the Coinbase network. The fully dollar-backed token targets institutional clients initially, with CEO Jamie Dimon acknowledging the bank’s strategic shift, stating, “we’re going to be in it and learning a lot.”
Other major banks are working on their own stablecoins along with collaborative industry-wide digital currencies. None of these are expected to launch before the end of this year. The CEO of Bank of America, Brian Moynihan, has recently stated that his institution’s stablecoin is currently being prepared, although he described it as an anticipated “complex array” of digital currency offerings.
Federal law requires stablecoin backing funds to be invested in government bonds, providing guaranteed profits to banks while offering depositors no interest. These have raised internal banking concerns regarding stablecoins potentially undermining traditional deposit bases.
Have a great day.
Peace. CryptoGod-1.
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