Key facts
- Senate Republicans sent a letter to federal banking regulators requesting fair capital rules for digital asset activities.
- The letter criticizes the Basel Committee's 1,250% risk weight for some crypto assets as overly harsh.
- Lawmakers advocate for a technology-neutral approach to capital standards that reflects real risks.
- Clear rules are needed for banks to expand on-balance sheet crypto services.
- The push occurs as Congress reviews broader crypto market legislation, with a key bill facing a tight deadline.
- Senator Cynthia Lummis stated a major crypto bill must pass this year or face significant delays until around 2030.
Senate Republicans have urged federal banking regulators to create fair capital rules for digital asset activities, arguing that current standards limit banks through harsh capital treatment. This push adds pressure as Congress reviews broader crypto market legislation. Senator Cynthia Lummis, along with five Republican colleagues, sent a letter to Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill, and Comptroller Jonathan Gould. The letter criticizes Basel Committee rules that assign a 1,250% risk weight to some crypto assets, stating this standard treats the asset class as too risky without proper calibration and effectively acts as a bank ban. The senators advocate for U.S. regulators to adopt a technology-neutral approach, similar to recent guidance where tokenized securities received the same capital treatment as traditional securities. They argue that banks require clear rules before expanding on-balance sheet crypto services, emphasizing that capital should reflect real risks rather than blanket penalties. The lawmakers believe fair standards would support lawful participation in digital asset markets and that agencies must prepare capital guidance before banks receive broader authority for crypto activities. The letter reflects growing Republican pressure on regulators to ease bank participation in digital asset markets, with the senators stating that rules should balance risks and opportunities and not block regulated crypto services, preventing activity from moving outside supervised channels. Separately, Senator Lummis warned that a key crypto bill, the Digital Asset Market Clarity Act, must pass the Senate this year, with under eight weeks of floor time remaining before summer recess and the start of midterm campaign season, or it may not have another chance until around 2030. The bill aims to set rules for SEC and CFTC oversight of crypto markets, but faces hurdles related to illicit finance concerns from some Democrats and law enforcement groups. The Blockchain Association is actively lobbying for the bill, releasing a letter from former law enforcement officials, though critics argue many of these officials now work for crypto firms.