Trump Administration to Ease SLR Regulation, Freeing $2 Trillion for Treasury Market

The Trump administration is set to implement a significant change by easing the Supplementary Leverage Ratio (SLR) regulation, marking the most substantial adjustment to capital requirements since the 2008 financial crisis. The SLR was established to ensure that major banks maintain a strong capital base to mitigate leverage risks, serving as a crucial safeguard against potential systemic failures. However, recent criticisms have pointed out that the SLR restricts the acquisition of low-risk assets such as U.S. Treasuries.

Expected to be announced this summer, the new policy aims to exempt U.S. Treasuries and central bank deposits from SLR calculations. This change could potentially free up to $2 trillion in balance sheet capacity, encouraging banks to re-enter the Treasury market and boost overall liquidity. The initiative has received backing from prominent financial leaders, including the U.S. Treasury Secretary and Federal Reserve Chair, who view it as a key banking reform.

While some analysts warn against loosening capital constraints during market volatility, many predict that this regulatory shift could lead to a decrease in U.S. bond yields and drive capital into the Bitcoin and cryptocurrency sectors. If the policy is executed smoothly, it could enhance liquid resources, increase bank involvement in U.S. Treasuries, and open the door for greater investment in risk assets like Bitcoin. This could potentially strengthen Bitcoin's mid-term bullish trend.