Citigroup UK CEO Warns Basel Crypto Rules May Drive Activity Underground

Citigroup’s UK CEO, Tiina Lee, has issued a stark warning against the upcoming global standards set by the Basel Committee, which categorize cryptocurrencies as among the riskiest assets a bank can hold. The new framework, set to take effect next year, imposes a 1,250% risk weight on banks’ crypto holdings, meaning institutions would have to hold £125 in capital for every £100 of crypto they carry on their books. Lee criticized this approach as “prohibitive,” questioning whether such stringent restrictions are truly in the public interest. She argued that overly harsh regulations could backfire, driving crypto activity underground into poorly regulated or opaque financial channels.

Lee’s defense of crypto comes at a challenging time for Citibank, as the bank is currently facing a lawsuit for negligence in a US federal court. Michael Zidell, who lost $20 million to a pig butchering-style romance scam, claims that Citibank failed to flag suspicious transactions totaling nearly $4 million, enabling scammers to drain funds through multiple accounts. The complaint alleges that the bank ignored clear warning signs, such as large, round-number transfers and suspicious account behavior. Zidell accuses Citibank of aiding and abetting fraud through inaction and poor oversight. While this case is unrelated to the Basel debate, it has revived questions about whether large banks are doing enough to monitor crypto-adjacent fraud.

In sharp contrast to Citigroup’s call for inclusion, Barclays Bank has taken a much more restrictive stance. Barclays announced it will block all crypto-related credit card transactions, citing the “volatile nature” of cryptocurrencies and the risk of unaffordable debt. This move signals a growing divide among banks on how to approach the sector. While Barclays shields itself from reputational and financial risk, critics argue such blanket bans only encourage consumers to turn to less secure, non-bank alternatives to access crypto.

Tiina Lee’s message is clear–keeping crypto within the bounds of regulated finance is better than driving it into the wild west. With regulators, banks, and customers all navigating the growing pains of digital asset adoption, the stakes are high. The differing stances of Citigroup and Barclays underscore the broader debate within the banking sector about the role of cryptocurrencies in the financial system. While some institutions see cryptocurrencies as a promising new asset class with the potential to disrupt traditional financial services, others view them as a risky and volatile investment that could expose customers to significant financial losses. This divide is likely to continue as the industry grapples with the challenges and opportunities presented by cryptocurrencies.