Overhaul of Crypto Banking Rules as Global Regulators Raise Concerns on Stablecoins

Overhaul of Crypto Banking Rules as Global Regulators Raise Concerns on Stablecoins

Global banking regulators are gearing up to modify the rules regarding how banks manage crypto assets, especially stablecoins. This change is prompted by increasing pressure from key economies and industry groups to revise the strict capital requirements set to be enforced next year.

The Basel Committee on Banking Supervision (BCBS), recognized as the leading global banking standard-setter, is currently in talks to potentially revise its 2022 framework, which introduced some of the most stringent capital regulations for crypto holdings.

These standards, which emerged after years of erratic behavior in digital markets, mandated that banks apply a staggering 1,250% risk weight to unbacked crypto assets like Bitcoin. This means banks must hold capital equivalent to the full value of their crypto exposure.

While these measures were designed to safeguard banks from potential losses, they inadvertently discouraged many institutions from offering crypto services.

However, the swift expansion of stablecoins and a significantly altered perspective from regulators and governments regarding digital assets have sparked discussions for change.

Possible Evolution of Basel’s Crypto Regulations

A report from Bloomberg indicates that the U.S. is spearheading the push for revisions, claiming the original standards are outdated and inconsistent with the current crypto landscape.

Stablecoins, which are digital tokens tied to assets like the U.S. dollar, have experienced rapid growth, aided by new regulatory frameworks such as the U.S. GENIUS Act that promotes their use in payments.

Presently, though, the Basel regulations treat permissionless stablecoins like Tether (USDT) and Circle’s USDC, operating on open blockchain networks, with the same stringent capital requirements as more volatile cryptocurrencies like Bitcoin.

Senior financial leaders have pointed out that this regulatory stance has sidelined banks, rendering them incapable of meeting the burgeoning institutional demand for digital asset services.

A recent report from The Banker highlights that the high-risk classification makes it “economically impractical” for banks to maintain crypto assets on their balance sheets, pushing trading activities toward unregulated venues.

Crypto Asset Management

The BCBS framework, initially finalized in late 2022 and updated in 2024, categorizes crypto assets into two primary groups: Group 1 encompasses tokenized traditional assets and stablecoins with dependable backing mechanisms, while Group 2 includes all other crypto assets facing steep capital requirements.

The global rollout of these rules has been postponed by a year to January 2026.

Diverging Perspectives Among Global Regulators

While the guidelines from the Basel Committee are non-mandatory, the committee’s 45 members—including regulators from 28 jurisdictions—typically adapt them for local rules.

Nevertheless, not all major regions share the same timeline for implementation. The European Central Bank advocates for the application of existing rules first, while the U.S., U.K., and several Asian regions are pushing for changes before these regulations are enacted.

Recently, Singapore has delayed its implementation by a year to ensure global consistency, and Hong Kong aims for lighter requirements for licensed stablecoins in 2026.

In the European Union, the Basel standards are being integrated through the Capital Requirements Regulation (CRR 3) and the Markets in Crypto-Assets (MiCA) framework.

An August draft from the European Banking Authority (EBA) provides detailed methodologies for assessing crypto exposure across credit, market, and liquidity risks.

Unbacked crypto assets will continue to be assigned a 1,250% risk weight, while stablecoins backed by traditional assets may benefit from a reduced 250% weight.

The EBA’s strategy aligns with Basel guidelines but includes transitional rules that allow banks some limited involvement with digital assets while more lasting frameworks are established.

Moreover, the EU is preparing to launch a euro-backed stablecoin in 2026, spearheaded by a coalition of nine European banks, including ING and UniCredit, under the supervision of MiCA.

The United Kingdom is adopting a similarly cautious approach. The Bank of England has stated that upcoming regulations will likely lean towards being “restrictive,” prompting banks to maintain minimal crypto exposure.

The Prudential Regulation Authority is working on a new prudential regime, CRYPTOPRU, expected to be finalized in 2026.

The GENIUS Act and Stablecoin Policy Challenges

At the same time, U.S. regulators are reassessing their prudential approach to stablecoins following the introduction of the GENIUS Act earlier this year.

This law establishes a framework for the issuance and use of stablecoins but leaves unresolved questions about how banking regulations will adapt.

The Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) are collaborating on how to implement Basel standards while managing domestic regulatory overlaps.

Industry organizations have ramped up pressure on the Basel Committee to reduce the capital requirements. In August, group associations such as the Global Financial Markets Association and the Institute of International Finance urged regulators to eliminate what they termed “cliff-effect” penalties.

Their joint letter argued that classifying tokenized U.S. Treasury securities as high-risk merely due to their presence on public blockchains violates principles of technology-neutral policy.

This discussion is occurring in light of broader apprehensions about the role stablecoins might play in transforming global finance. A recent report by Standard Chartered indicated that over $1 trillion could potentially move out of emerging-market banks and into stablecoins by 2028, as users in developing regions seek safer stores of value in dollar-pegged digital assets.

Key Takeaways

Global banking regulators are considering changes to the rules governing crypto asset management, particularly for stablecoins.
The BCBS's current capital requirements are deemed outdated by the U.S., prompting discussions for revisions.
Stablecoins are experiencing rapid growth, but face the same heavy capital charges as volatile cryptocurrencies under existing Basel rules.
There is a divide among global regulators in terms of alignment and timelines for implementing the Basel guidelines.
The GENIUS Act in the U.S. has sparked ongoing debates on the regulation of stablecoins and their impact on the banking sector.