Erik Thedéen, chair of the Basel Committee on Banking Supervision, called for a review of the capital rules that apply when banks hold crypto assets, arguing that the current framework excessively penalizes banking participation in the digital ecosystem. The issue has practical urgency because a 1.250% risk weight makes involvement difficult and could push activity toward less supervised entities.
The core of the criticism is the prudential treatment that classifies certain crypto assets — Group 2a — with a risk weight of 1.250%, which requires capital equivalent to the value of the exposure. That requirement makes it economically unviable for banks to incorporate crypto assets on their balance sheets, according to the diagnosis set out by the committee chair, resulting in a regulation that, in critics’ view, prioritizes risk aversion over a differentiated assessment of assets. Brief definition: a risk weight assigns a percentage of an asset’s value to calculate the regulatory capital that an entity must hold.
Industry organizations such as the Institute of International Finance (IIF) and the International Swaps and Derivatives Association (ISDA) argue that the rules are excessively conservative and encourage regulatory arbitrage, with activity migrating to jurisdictions or actors with lower supervision. The United States and the United Kingdom have shown resistance to adopting the standard as is, considering it impractical for banking operations.
The regulatory response has not been homogeneous. The Monetary Authority of Singapore (MAS) has postponed the application of the rules from 1 January 2026 to 1 January 2027 — or even later — to give local banks such as DBS and UOB time to adapt their risk management and disclosure systems. Hong Kong (HKMA) maintains a timeline with an effective date in January 2026, underscoring the fragmentation of international implementation.
Practical consequences for banks, markets and regulators
Applying very high capital weights can push the digital asset business outside the banking perimeter, with negative consequences for traceability, supervision and customer protection. Distributed ledger technology (DLT), defined as a system that records transactions in a distributed manner among participants, offers operational improvements such as faster settlement and lower counterparty risk; however, its adoption is held back by prudential uncertainty.
Brief definition: a stablecoin is a crypto asset designed to maintain a stable value against a reference, usually a fiat currency, and its risk varies depending on the reserve scheme and applicable regulation. The Basel Committee has published technical amendments and recognizes the pressure to recalibrate the approach; the debate now concerns balancing financial protection with allowing banks to prudently manage and custody crypto exposures.
The call to review capital rules opens a window to harmonize prudence and regulated access to crypto assets; the next milestone will be the adoption or modification of the Basel Committee’s technical amendments and the implementation decisions in 2026–2027, which will shape the operational and compliance map for banks and service providers in digital assets.
