Senate Republicans Press Regulators on Crypto Capital Rules

TLDR

• Senate Republicans led by Sen. Cynthia Lummis urged regulators to clarify capital standards for digital assets.
• The lawmakers criticized the Basel Committee’s 1,250% risk weight on certain digital assets.
• They asked the Federal Reserve, FDIC, and OCC to adopt a technology-neutral capital framework.
• The letter referenced a March joint statement on capital treatment for tokenized securities.
• Senators said pending legislation expanding bank digital asset activities will require clear capital guidance.

Senate Republicans have urged federal regulators to clarify bank capital standards for digital assets. The group sent a formal letter to top financial supervisors before a House hearing. Lawmakers asked agencies to develop updated guidance that reflects current market structures.

Lawmakers Challenge Basel Digital Asset Risk Weights

Sen. Cynthia Lummis led the letter alongside Sens. Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted. They addressed Federal Reserve Vice Chair Michelle Bowman, FDIC Chair Travis Hill, and Comptroller Jonathan Gould. All three officials are scheduled to testify before the House Financial Services Committee.

The senators criticized standards issued by the Basel Committee on Bank Supervision. They focused on the 1,250% risk weight assigned to certain digital assets. They argued that this treatment raises capital requirements beyond comparable traditional assets.

The Basel Committee operates under the Bank for International Settlements and includes 45 regulators. U.S. banking agencies participate in its rulemaking discussions. However, the senators urged domestic regulators to reassess how they apply those standards.

They stated that capital treatment should reflect both risks and opportunities. They wrote that any framework should adopt a technology-neutral approach. They said banks need authority to participate meaningfully in digital asset markets.

Senators Call for Updated Crypto Rules Framework

The letter referenced a March joint statement from the FDIC, Federal Reserve, and OCC. That statement clarified capital treatment for tokenized securities. Regulators said tokenized securities should generally receive the same treatment as non-tokenized versions.

The senators argued that this principle should apply consistently across digital assets. They wrote that regulators should extend similar treatment beyond tokenized securities. They urged agencies to align capital rules with asset characteristics rather than technology labels.

They noted that Congress is reviewing broader digital asset legislation. That legislation would expand banks’ ability to hold digital assets on their balance sheets. They said such authority would require clear capital guidance.

They asked regulators to coordinate on a fresh framework. They emphasized that guidance should reflect accurate risk assessments.

The lawmakers released a public statement on Thursday. The release coincided with the scheduled testimony of the three regulators. The letter seeks direct clarification on how agencies plan to treat digital assets under bank capital standards.

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