According to market analyst Nick Pukrin, the Basel III rules governing bank capital requirements are due to be updated in 2026, and if Bitcoin (BTC) gets a lower risk rating under the revised rules, it could potentially trigger a “huge” influx of liquidity into BTC.
Under current Basel rules, BTC and similar digital assets have a weighting of 1,250%, meaning banks must hold reserve assets at a 1:1 ratio to hold all Bitcoin on their balance sheets, Pukrin said.
These restrictive capital requirements make it “almost impossible” for banks to hold BTC or offer BTC-related services, he added. He said:
“The Fed just announced a proposal on how to implement these rules in the US with a 90-day public comment window. If the treatment of BTC improves even a little, it could open the door for banks to eventually integrate BTC into the financial system.”
In February, several executives of cryptographic treasury companies called for the Basel rules to be amended to provide more appropriate weightings for digital assets that would allow banks to participate in the blockchain economy.
related to: Bitcoin advocacy group to fight Basel’s ‘toxic’ treatment of cryptocurrency
The Basel rules create another type of chokepoint
The Basel Committee on Banking Supervision (BCBS) proposed the current capital requirements for cryptocurrencies in 2021, placing crypto in the highest risk category.
According to Jeff Walton, chief risk officer at Bitcoin hedge fund Strive, while BTC and crypto carry a 1,250% risk weight under current rules, investment-grade corporate bonds carry a risk weight of up to 75%.
Gold, government bonds and physical cash have a 0% risk weight, Walton said, adding that “risk is mispriced.”
Chris Perkins, president of investment firm CoinFund, told Cointelegraph that Basel’s capital requirements are a stealthy form of strangulation of the crypto industry and are more subtle than efforts to shut down crypto companies as part of Operation Chokepoint 2.0.
“It’s a very subtle way of restricting activity by making it very expensive for the bank to do these activities,” Perkins said.
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