Global Banks Cry Foul Over Crypto Capital Rules: "Chokepoint" to Innovation?

The global finance industry is urging regulators to reconsider and revise stringent capital requirements for cryptocurrency activities, as outlined in upcoming Basel Committee on Banking Supervision (BCBS) standards. In a joint letter to the BCBS, major financial lobbying groups—including the International Institute of Finance, the International Swaps & Derivatives Association, and the Global Blockchain Business Council—called for a pause in the implementation of the 2026 regulations, which they argue impose excessive capital surcharges on banks engaging with cryptocurrencies. These groups emphasized the need to reassess the evolving use cases for distributed ledger technology (DLT) and to recalibrate the rules to reflect the current market landscape [2].

The proposed capital requirements, introduced in 2022 amid heightened concerns over crypto market instability and financial contagion, have been criticized for creating a "chokepoint" for banks engaging with digital assets. According to Chris Perkins, president of investment firm CoinFund, the capital rules reduce a bank’s return on equity (ROE), making crypto-related activities prohibitively expensive. Perkins described the effect as a nuanced suppression mechanism, where banks are discouraged from participating in the space due to the high costs of compliance and reserve requirements [1].

The push for reform is driven by the increasing integration of crypto into mainstream finance. In the United States, for instance, President Donald Trump has enacted legislation to support the industry, and major banks like JPMorgan Chase are now exploring areas such as custody, trading, and stablecoin issuance. Jamie Dimon, CEO of JPMorgan, previously voiced strong skepticism about crypto, but the bank’s recent forays indicate a shift in institutional attitudes. Despite these developments, the letter to the BCBS warns that inconsistent implementation of the new rules could undermine the goal of establishing a level playing field and exacerbate cross-border financial fragmentation [2].

The debate over crypto regulation is not limited to capital requirements. The Bank for International Settlements (BIS), which coordinates the BCBS, has expressed concerns about the systemic risks posed by stablecoins and decentralized finance (DeFi) protocols. A BIS report from April 2025 argued that stablecoins fail as effective monetary instruments and could pose risks to the traditional financial system. The report also highlighted the growing interconnections between stablecoins and traditional finance, warning of potential spillover effects. Meanwhile, the BIS continues to advocate for central bank digital currencies (CBDCs) as a safer alternative to decentralized crypto assets [1].

In parallel, the Federal Reserve has decided to integrate its 2023 crypto and fintech bank supervision program into its standard oversight practices, citing improved understanding of the associated risks. This shift comes amid broader legislative developments, including the enactment of the GENIUS Act in August 2025, which sets a legal framework for stablecoins pegged to the U.S. dollar. While the law aims to facilitate crypto adoption and support stablecoin development, its full implementation may take years, as regulatory agencies draft accompanying rules [3].

Source:

[1] Basel Bank capital rules create 'chokepoint' for crypto (https://cointelegraph.com/news/basel-bank-capital-rules-create-chokepoint-crypto)

[2] Finance Industry Seeks Overhaul of Global Crypto Rules ... (https://www.bloomberg.com/news/articles/2025-08-19/finance-industry-seeks-overhaul-of-global-crypto-rules-for-banks)

[3] US Fed ends banking program for crypto (https://thepaypers.com/regulations/news/us-fed-to-end-monitoring-program-of-crypto-and-fintech-bank-activities)