Senate Republicans press U.S. regulators to clarify crypto capital rules

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GOP urges crypto capital clarity

Highlights

Senate Republicans sent a May 27 letter urging Fed, FDIC, and OCC leaders to clarify and modernize capital standards for banks holding digital assets.
They criticized the Basel Committee's 1,250% risk weighting for crypto exposures and called for future guidelines to be technology-neutral and reflect actual risk profiles.
Pressure on regulators increases as the Senate aims to pass the CLARITY Act before the November midterms, linking new crypto regulations to updated capital frameworks.

Letter urges new bank capital framework

As reported by Senator Cynthia Lummis and Cointelegraph, a group of Senate Republicans sent a May 27 letter to Federal Reserve Vice Chair for Supervision Miki Bowman, Federal Deposit Insurance Corp. Chairman Travis Hill and Comptroller of the Currency Jonathan Gould, urging the agencies to clarify capital standards for companies engaged in crypto activities.

The senators praised guidance issued in March on the capital treatment of tokenized securities, but said regulators should go further and create a clear and fair framework for digital assets held on bank balance sheets. They argued that current international standards effectively discourage banks from holding crypto because they require reserve assets above the value of those digital asset positions.

The lawmakers also challenged the Basel Committee on Bank Supervision's longstanding 1,250% risk weighting for crypto exposures, saying it is not based on a calibrated assessment of the actual risk profile of digital assets. In the letter, they said any future capital treatment should reflect both the opportunities and risks of digital assets and follow a technology-neutral approach that allows banks to participate meaningfully in crypto markets.

Senate bill debate raises pressure on regulators

Pressure for clearer guidance is building as the Senate prepares to resume debate on the CLARITY Act, a bill that would define how federal agencies regulate crypto markets and companies. The current version would allow banks to use digital assets and blockchain in areas including payments, lending, custody and trading.

Senate leaders are seeking to pass the bill before the November midterm elections, when a failure to advance it could force lawmakers to restart the process in the next session of Congress. The Senate Banking and Agriculture Committees have already passed separate versions covering securities and commodities, leaving the full Senate to reconcile the two approaches.

Lawmakers still need to address additional issues, including stablecoins, ethics and crypto developers, before the measure can secure the 60 votes needed to pass without a prolonged debate. The letter's signatories, including Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd and Jon Husted, said legislation now under consideration will require related capital guidance and urged regulators to begin work on a new crypto framework.

Our earlier coverage on Senate Banking Committee Democrats’ CFPB funding bill explained how lawmakers are seeking to lock in automatic, fully available financing for the consumer watchdog by tying transfers to Federal Reserve operating expenses. The proposal is framed as a way to protect supervision and enforcement capacity amid broader concerns about consumer risks, including fraud and crypto-related scams.

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