Crypto industry urges review of Basel III '1,250% risk weight'

JH Kim

Summary

The crypto industry said it is urging a review of the Basel III accord’s 1,250% risk weight rule for banks’ crypto-asset exposures.
It argued that the rule severely limits banks’ crypto holdings and related business participation, curbing the traditional financial sector’s participation in digital assets.
Regulators said they maintain that strict capital requirements are necessary due to crypto assets’ price volatility and systemic risk.

The crypto (cryptocurrency) industry has argued that the Basel III accord should revisit the rule applying a 1250% risk weight to banks' crypto-asset exposures.

According to crypto-focused media outlet Cointelegraph on the 20th (local time), the Basel Committee on Banking Supervision classifies crypto assets as the highest-risk category and requires banks to apply a 1250% risk weight when they are exposed to crypto assets. The rule has been widely seen as effectively imposing severe limits on banks' crypto holdings and participation in related businesses.

Jeff Walton, chief risk officer (CRO) at U.S. asset manager Strive, said, "If the United States is to become the world's crypto hub, banking regulatory reform is needed," adding that "the current risk weight is set excessively high."

The industry argues that the rule is discouraging the traditional financial sector's participation in digital assets and could hinder mainstream adoption. Regulators, meanwhile, maintain that strict capital requirements are necessary due to crypto assets' price volatility and systemic risk.