The Bitcoin Policy Institute intends to challenge a Federal Reserve proposal that would impose strict international banking rules on Bitcoin. The Basel Committee’s rules would assign Bitcoin a punitive 1,250% risk weight, forcing banks to hold capital equal to their Bitcoin exposure. The institute argues this classification misunderstands the asset and creates undue barriers for banks serving crypto businesses.
The Bitcoin Policy Institute (BPI) plans to contest Bitcoin’s treatment under international banking regulations as U.S. regulators prepare new guidance. BPI managing director Conner Brown stated the group will review the upcoming Federal Reserve proposal and submit comments.
Brown emphasized the institute wants U.S. regulators to properly evaluate Bitcoin’s classification. This move aligns with a Federal Reserve plan to issue a proposal on how U.S. banks should apply Basel Committee risk-weighting rules.
These rules assess asset risk to determine required bank capital. Brown said Basel rules classify Bitcoin harshly with a 1,250% risk weight, which is extreme compared to traditional assets.
Federal Reserve Governor Michelle Bowman stated the Fed plans regulations for the final Basel phase implementation. The goal is efficient regulation while ensuring banks remain strong to support growth.
A 1,250% risk weight means banks must hold capital equal to their Bitcoin holdings. This makes holding Bitcoin extremely costly for financial institutions.
In contrast, cash, government bonds, and gold carry a 0% risk weight requiring no additional capital. Brown previously expressed disapproval in a blog post, calling Bitcoin’s Basel classification the “most punitive.”
He argued the rule misunderstands how the asset functions within the financial system. The debate began in 2021 when the Basel Committee on Banking Supervision proposed placing cryptocurrencies in a high-risk group.
This classification restricts bank cryptocurrency holdings to 1% of their core asset value. Brown contends these restrictions prevent banks from serving Bitcoin users and crypto businesses effectively.
