Industry Pushes Basel III to Revisit 1250% Crypto Risk Weight, Risks U.S. Competitiveness
Global crypto and banking leaders are intensifying pressure on the Basel Committee to revisit the Basel III rule that assigns a 1,250% risk weight to most cryptocurrencies. The rule — Group 2 classification — forces banks to hold capital equal to full exposure, making custody and institutional services for crypto economically prohibitive compared with assets carrying 0% weight such as cash and sovereign debt. Industry figures including Jeff Walton (Strive), Chris Perkins (CoinFund) and Phong Le have argued the single, extreme weight misprices risk, fails to distinguish regulated or custody-backed assets from speculative tokens, and could push innovation offshore, weakening U.S. competitiveness. Critics propose differentiated risk weights based on custody arrangements, liquidity, regulatory status and protocol security. The Basel Committee first proposed the weighting in 2021 and finalized related capital requirements in 2024; it has signalled potential reconsideration in 2024–25 amid stablecoin growth and public comments from BCBS leadership about a “different approach.” Policymakers stress the need for international consensus and financial stability, so any change is likely gradual and could proceed via pilot programs and more data collection. Global regulatory contrasts — the EU’s MiCA, Singapore and Switzerland sandboxes, plus U.S. moves such as OCC custody guidance and SEC approval of spot bitcoin ETFs — mean regulatory shifts in one jurisdiction may not immediately translate into global change. For traders: a downward revision or differentiated treatment would lower banks’ capital costs for holding crypto, likely increasing institutional custody, lending and liquidity for BTC and related markets. Conversely, retaining the 1,250% weight preserves high custody costs, limits bank involvement and may constrain institutional flows. Watch consultations, signals from major regulators (US, EU, UK), BCBS pilot outcomes and stablecoin regulation developments as potential catalysts for material changes to institutional access and market liquidity.
Neutral
The news is neutral for BTC price direction in the near term but has clear structural implications. If regulators move to lower or differentiate the 1,250% risk weight, that would be bullish over the medium-to-long term by lowering banks’ capital costs, enabling more bank custody, lending and institutional flows into BTC — increasing liquidity and potentially reducing volatility. Conversely, maintaining the rule keeps institutional participation constrained and is bearish structurally, but it does not immediately force price declines absent a large institutional sell-off. In the short term, markets may react to firm signals (consultations, pilot launches or regulator statements) with volatility driven by expectations of increased institutional demand. Over months to years, a confirmed policy shift would likely be net bullish for BTC as it unlocks new custody, ETFs, lending and tokenization use cases. Because change requires international consensus and is likely gradual, the immediate price impact is limited, so classify the near-term impact as neutral while monitoring developments that could tilt sentiment bullish.