The Bitcoin Policy Institute (BPI) announced it will challenge the U.S. Federal Reserve‘s proposed adoption of international banking rules that assign Bitcoin a punitive risk weight. The Fed is set to issue rules implementing the Basel Committee on Banking Supervision’s guidelines, which treat Bitcoin as a high-risk asset requiring banks to hold capital equal to 125% of its value.
The Bitcoin Policy Institute says it will push the U.S. Federal Reserve to change how Bitcoin is treated. This comes as the central bank prepares to issue rules for how U.S. banks should implement international guidelines for asset risk weighting.
BPI managing director Conner Brown stated the institute will submit a public comment on the proposal. He said Bitcoin is treated as a “toxic asset” under the Basel Committee‘s global banking framework.
Brown added the asset carries a 1,250% risk weighting, which he called harsher than virtually all other asset classes. This requirement forces banks to back any Bitcoin holdings at a 1:1 ratio with approved collateral.
Federal Reserve vice chair for supervision Michelle Bowman said the agency will propose rules in the coming weeks. Bowman stated the aim is more efficient regulation and banks better positioned to support economic growth.
In a blog post last month, Brown called Bitcoin’s treatment the most punitive classification in the Basel capital framework. He described it as a category error that makes it extremely difficult for banks to provide financial services to Bitcoin companies.
The Basel Committee had proposed in 2021 placing crypto in its high-risk Group 2 set of assets. Group 2 holdings were restricted to under 1% of the value of a bank’s safer Group 1 holdings, which include cash and government debt.
