Capital Rule Threatens Bank Bitcoin Holdings

A group of Republican senators has warned US bank regulators that a little-known capital rule requiring banks to hold 1,250% risk weight for certain crypto assets could effectively lock them out of Bitcoin. In a May 27 letter, the senators argued that this rule undermines congressional efforts to integrate traditional finance with digital asset markets. The rule, which imposes punitive capital requirements, may deter banks from offering custody or trading services for Bitcoin, even as legislation advances to clarify regulatory frameworks. This development highlights ongoing tensions between regulators and lawmakers over the appropriate balance between innovation and financial stability. The outcome could significantly impact institutional adoption of Bitcoin and the broader crypto market's integration into the traditional banking system.

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