(HedgeCo.Net) Regulators around the world are tightening the screws on how banks interact with cryptocurrencies. In a major push, the Basel Committee on Banking Supervision (BCBS) has flagged the need to rethink the risk treatment of digital assets like Bitcoin and stablecoins. Financial Times
The Core Development
Under existing rules, banks may need to assign risk-weights of up to 1,250% to exposures in highly volatile crypto assets or permissionless blockchains — effectively making bank participation very costly. Financial Times
However, major jurisdictions such as the U.S. and U.K. are balking at these rules in current form, saying they are unrealistic. The BCBS chair has called for “a different approach”. Financial Times
Why This Matters
- Banks are major conduits of credit, custody, and payments. If they scale back crypto engagement, the infrastructure and growth of crypto markets could slow significantly.
- This also underscores how regulators view crypto: not as a fringe experiment but as an asset class with systemic implications.
- For institutional crypto adoption, bank engagement is vital. Tight rules reduce the ease of banks providing crypto-related services (custody, loans, etc.).
Regional Impacts & Outlook
- In friendly jurisdictions, banks may carve out regulated “safe zones” for crypto exposure (e.g., through fully collateralised products).
- In more restrictive regions, banks may simply exit crypto exposure — reducing market liquidity and institutional flows.
- Crypto firms will need to deal with rising compliance and risk management costs, potentially passing them on to users.
What to Watch
- Will banks begin reducing their crypto exposure or pull back from servicing crypto clients?
- Are stablecoin regimes and infrastructure getting the attention they deserve, given the regulatory focus?
- Will new frameworks emerge that balance innovation with risk? The next 3-6 months could see proposals or pilot zones.
Bottom Line
Crypto’s maturation includes regulatory maturity — and right now, the message is clear: banks and traditional finance are being held to stricter standards when it comes to crypto. This may slow some growth, but it could also clear the way for more resilient long-term infrastructure.