Crypto Banking Rules Face Overhaul as Global Regulators Sound the Alarm on Stablecoins

Core Viewpoint - Global banking regulators are considering revisions to capital requirements for banks handling crypto assets, particularly stablecoins, in response to evolving market conditions and pressures from major economies and industry groups [1][4]. Group 1: Current Regulatory Framework - The Basel Committee on Banking Supervision (BCBS) established stringent capital rules in 2022, requiring banks to hold capital equal to the entire value of unbacked crypto assets, imposing a 1,250% risk weight on assets like Bitcoin [2][6]. - These measures were intended to protect banks from potential losses but have discouraged institutions from offering crypto-related services [2][5]. Group 2: Shift in Market Dynamics - The rapid growth of stablecoins and changing perceptions of digital assets have sparked renewed discussions about the appropriateness of existing regulations [3][4]. - The U.S. is advocating for updates to the Basel standards, arguing that they are outdated and do not align with the current crypto market structure [4]. Group 3: Impact on Financial Institutions - Current Basel rules impose the same heavy capital charges on permissionless stablecoins as on highly volatile cryptocurrencies, limiting banks' ability to meet institutional demand for digital asset services [5][6]. - A report indicated that the high-risk classification has rendered it "economically unviable" for banks to hold crypto on their balance sheets, pushing trading activities towards unregulated platforms [6]. Group 4: Future Developments - The BCBS framework categorizes crypto assets into two groups: Group 1 includes tokenized traditional assets and stablecoins with reliable backing, while Group 2 encompasses all other crypto assets subject to punitive capital treatment [6]. - The global implementation of these standards has been postponed to January 2026 [7]. - Although the Basel Committee's guidelines are non-binding, they are typically adopted by its 45 member jurisdictions [8].