The advocacy group will push the Federal Reserve to revise the 1,250% risk weight imposed on Bitcoin under the Basel framework.
The Bitcoin Policy Institute (BPI) has announced it will actively oppose the way Bitcoin is treated under the Basel framework, ahead of an imminent regulatory proposal from the U.S. Federal Reserve. Conner Brown, managing director of the BPI, stated in a post on X that the organization will “carefully review this proposal and submit a public comment to ensure that U.S. regulators treat Bitcoin in the right way.”
The move comes one day after the Fed announced its intention to issue a public proposal on how American banks should implement the Basel Committee on Banking Supervision’s guidelines on asset risk weighting. Michelle Bowman, the Federal Reserve’s Vice Chair for Supervision, stated on Thursday that the agency will propose the new rules in the coming weeks, with the goal of “more efficient regulation and banks better positioned to support economic growth, while preserving safety and soundness.”
According to Brown, Bitcoin is currently classified as a “toxic asset” under the Basel framework, carrying a 1,250% risk weight, described as “more severe than virtually every other asset class.” By comparison, cash, physical gold, and sovereign debt carry a 0% risk weight under the same framework. The 1,250% capital requirement means that banks must hold approved collateral on a 1:1 basis against any bitcoin on their balance sheet, making holding the asset significantly more costly than other asset classes.
In a blog post published last month, Brown had already described Bitcoin’s treatment as “the most punitive classification” in the entire Basel Committee framework and a “category error.” In 2021, the Basel Committee had proposed placing cryptocurrencies in Group 2 of high-risk assets, limiting holdings to less than 1% of the value of Group 1 assets. “This risk weighting makes it extremely difficult for banks to provide financial services to Bitcoin holders and companies in the sector,” Brown stated.
