Republican senators push capital rules for digital assets

A group of Republican senators is urging federal banking regulators to develop new capital standards for digital assets, arguing that existing international rules are overly punitive and stifle bank participation in the sector. The lawmakers, led by Senator Cynthia Lummis of Wyoming, sent a letter last week to the heads of the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

The letter specifically criticizes standards from the Basel Committee on Banking Supervision, an international standard-setting body that includes U.S. regulators. The committee has assigned a "1,250 risk weight" to certain digital assets. This requirement means banks must hold capital equal to 125% of their exposure to these assets, a far higher buffer than for many traditional holdings like corporate bonds. The senators contend this effectively acts as a prohibition, preventing banks from engaging meaningfully with digital assets.

The lawmakers called for a new, technology-neutral capital framework that they say would more accurately reflect the risks and opportunities of digital assets. They argued that such an approach would give banks the...