Senate Republicans Urge Capital Rule Changes for Crypto Banks

A group of Senate Republicans led by Sen. Cynthia Lummis asked the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency to revise bank capital rules for digital assets in a letter sent last week ahead of the regulators’ testimony before the House Financial Services Committee on Thursday.

The letter was addressed to Federal Reserve Vice Chair of Supervision Michelle Bowman, FDIC Chair Travis Hill and Comptroller of the Currency Jonathan Gould. Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd and Jon Husted joined Lummis as signatories.

The lawmakers criticized an international Basel Committee standard that assigns a 1,250% risk weight to certain digital assets. Risk weights determine how much capital a bank must hold against an asset; higher weights require larger capital buffers.

The senators asked U.S. supervisors to develop a fresh, technology-neutral capital framework that reflects both risks and business opportunities in digital asset markets. The request sought clearer guidance on how on-balance-sheet digital asset activities would be treated for regulatory capital purposes.

“Any proposed capital treatment of on-balance sheet digital asset activities should accurately reflect the opportunities and risks of digital assets-and be based on, to the extent possible, a technology-neutral approach that gives banks the authority to participate meaningfully in digital asset markets,” the letter reads.

The letter referenced a March joint statement from the Fed, FDIC and OCC that said tokenized securities should generally receive the same capital treatment as non-tokenized forms of the same asset. The senators asked regulators to apply that principle more broadly to other categories of digital assets.

Congress is considering legislation that would expand banks’ authority to hold and transact in digital assets on their balance sheets. The senators noted any such law would create a need for practical capital rules to ensure banks hold appropriate reserves when engaging in digital asset activities.

Regulators have previously highlighted volatility, operational risks and custody concerns tied to digital asset exposure on bank balance sheets. The senators asked supervisors to provide capital guidance that addresses those supervisory concerns without setting capital charges so large they would effectively prevent banks from holding or servicing certain digital assets.

The Basel Committee, part of the Bank for International Settlements, issues global standards and includes central banks and supervisors from 45 jurisdictions. U.S. supervisors have discretion in how they adopt those recommendations domestically; the senators urged regulators to design capital rules consistent with supervisory objectives while giving banks clear rules for participation in digital asset markets.