A group of Republican senators in the US have called for fairer capital requirements for banking activities linked to crypto assets. The senators argued that the current framework imposes an excessively high capital burden on financial institutions, effectively limiting banks’ activities in this area. The initiative came to the agenda at a time when comprehensive digital asset regulations were being discussed in Congress.
Letter to regulators from Republican senators
Wyoming Senator Cynthia Lummis, who spearheaded the process, is among those who have been working on digital assets for a long time. Lummis and five Republican senators sent a letter addressed to major U.S. banking regulators. The letter was directed to Fed Deputy Commissioner for Supervision Michelle Bowman, FDIC Chairman Travis Hill and Office of the Comptroller of the Currency Director Jonathan Gould.
Senators emphasized that banks should keep capital appropriate to the actual risk level, and that it is not a correct approach to consider all digital asset activities as overly risky as a single item.
Senators openly criticized the 1,250% risk weight that the Basel Committee on Banking Supervision imposed on some digital assets. Stating that this rate considers the entire sector extremely risky without sufficient discrimination, the group stated that this approach has a prohibitive effect in practice.
Mini dictionary: Basel Committee on Banking Supervision is known as a body that prepares international standards for capital adequacy and risk management of banks. The committee’s decisions do not have the nature of a direct law, but they guide national regulations in many countries.
Tokenized securities cited as an example
The letter asked regulators to expand their recent approach to tokenized securities to a broader digital asset framework. The Fed, FDIC and OCC announced in March that tokenized securities will generally be treated as capital similar to traditional securities. The same principle should be considered for other digital asset activities, the senators noted.
According to Republican senators, clear and predictable rules are needed before banks can expand crypto asset services on their balance sheets. The group argued that capital requirements should be determined according to concrete risk factors, not with the general prohibition logic. It was stated that this approach could enable supervised financial institutions to participate in digital asset markets in a more controlled manner.
Senators noted that balanced rules could pave the way for banks to offer crypto asset services under supervision and contribute to keeping commercial activity within the regulated financial system.
It coincided with the congress calendar
The timing of the letter also attracted attention. It is evaluated that the comprehensive crypto asset regulations discussed in Congress may allow banks to carry out more digital asset activities on their balance sheets. Senators therefore argued that capital rules need to be clarified before new powers come into effect.
Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd and Jon Husted also supported the initiative. The issue has thus moved beyond a purely technical banking debate to become part of a broader Republican crackdown on regulators.
All eyes are on the response of regulatory agencies
The senators argued that the capital framework should consider both risks and market potential together. They expressed the view that current standards do not adequately reflect current market conditions and could push some activities out of the regulated banking system.
The debate is expected to become more visible in the coming days. Michelle Bowman, Travis Hill and Jonathan Gould are scheduled to testify before the House Financial Services Committee on Thursday. The assessments to be made in this session are expected to influence the next steps regarding the capital treatment of crypto assets in the US banking system.
