The Bitcoin Policy Institute (BPI) says it is pushing the US Federal Reserve to change the way it treats Bitcoin, as the central bank is set to adopt rules on how banks should apply international guidelines for risk-weighting assets.
“BPI will carefully review this proposal and provide public comment to ensure that US regulators get the right treatment for Bitcoin,” Bitcoin Policy Institute Managing Director Conner Brown said in an X post on Wednesday.
It comes just a day after the Fed announced it would submit for public comment how US banks should apply risk-weighting guidelines, which determine how much different assets are held on a bank’s balance sheet, from the Basel Committee on Banking Supervision.
Brown said that Bitcoin (BTC) is “viewed as a toxic asset under the Basel framework, a global standard for banking regulations.
He added that it has a 1,250% risk weight, which is “harder than any other asset class”.
“More effective regulation” is the goal: Federation
Federal Reserve Vice Chair for Supervision Michelle Boman said Thursday that the agency will propose rules in the coming weeks to implement the final phase of Basel in the U.S.
Bowman said the goal is “more efficient regulation and banks that are better (positioned) to support economic growth and protect safety and soundness.”
The 1,250% capital requirement means that banks must back any Bitcoin on their balance sheets at a 1:1 ratio with approved collateral, making cryptocurrency more expensive to hold than other asset classes.
Cash, physical gold and government debt have a risk weight of 0% in the Basel framework.
“The Most Punitive Classification”: Bitcoin Policy Institute
Brown said in a blog post last month that Bitcoin’s treatment is “the most punitive classification” in the Basel Committee’s capital framework and a “categorical error.”
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In 2021, the Basel Committee proposed that crypto be placed in the group of high-risk assets of Group 2. Group 2 shares were limited to less than 1% of the value of Group 1 shares.
“This weight of risk makes it very difficult for banks to offer financial services to Bitcoiners and Bitcoin companies,” Brown said.
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