Wall Street Groups Urge Review of Basel’s Crypto Rules

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Global financial regulators are facing renewed pressure from Wall Street as major U.S. trade groups have called for a rethink of the Basel Committee’s crypto banking standards. The move comes amid growing institutional adoption of digital assets, rising demand for custody services, and concerns that the current framework could stifle innovation while pushing crypto activity outside of regulated markets.

The Basel Crypto Standards Under Scrutiny

The Basel Committee on Banking Supervision (BCBS), an international regulatory body overseeing global banking standards, introduced its final crypto asset framework in late 2022. These rules, set to be implemented in 2025, impose strict capital requirements on banks holding cryptocurrencies.

Under the framework, cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) fall under the riskiest “Group 2” classification. This means banks must hold one dollar of capital for every dollar of crypto exposure, a ratio far stricter than for traditional assets. The goal is to prevent systemic risks from highly volatile assets, but Wall Street trade groups argue that the rules are too conservative and overly restrictive.

Wall Street Pushback: Who’s Leading the Charge?

In a joint letter, prominent organizations including the American Bankers Association (ABA), the Securities Industry and Financial Markets Association (SIFMA), and the Financial Services Forum (FSF) urged the Basel Committee to revise its standards. These groups argue that the rigid capital requirements discourage banks from engaging in crypto markets and could ultimately undermine regulatory oversight by forcing activity into less transparent, unregulated entities.

Their core message: banks should be able to safely participate in the crypto economy without facing punitive rules that block innovation and competitiveness.

Key Arguments From U.S. Trade Groups

The Wall Street organizations outlined several key points:

Excessive Capital Requirements – The “one-to-one” capital mandate makes it financially unattractive for banks to hold or offer crypto-related services, limiting market growth.
Risk Misclassification – Not all digital assets carry the same risk. Treating all cryptocurrencies under one strict category ignores differences between Bitcoin, stablecoins, and tokenized real-world assets.
Competitive Disadvantage – Overly harsh regulations could push U.S. and European banks behind competitors in Asia and the Middle East, where crypto rules are evolving more progressively.
Systemic Stability Concerns – Ironically, by keeping regulated banks out, crypto activity may migrate to shadow banking and offshore exchanges, increasing overall financial risk.

Market Implications of a Basel Rethink

If regulators respond to Wall Street’s demands, a recalibration of the Basel crypto standards could have major implications for both banks and the broader digital asset market.

Bank Participation in Crypto – More flexible rules would encourage large financial institutions to expand custody services, trading desks, and tokenization projects.
Institutional Inflows – Looser restrictions could attract billions in institutional capital, boosting liquidity and trust in markets for Bitcoin, Ethereum, and tokenized securities.
Global Regulatory Race – Countries that adapt regulations faster may gain a competitive edge in financial innovation and blockchain integration.
Crypto Price Sentiment – A more favorable regulatory outlook could strengthen long-term bullish sentiment in BTC and ETH, especially among institutional investors.

Geopolitical and Competitive Dimensions

The debate over Basel’s crypto rules highlights geopolitical tensions in financial regulation. While the U.S. and Europe are taking a more cautious approach, regions like the UAE, Singapore, and Hong Kong are positioning themselves as crypto-friendly hubs. Wall Street’s call for reform signals a recognition that restrictive frameworks could erode U.S. financial leadership in the digital economy.

If the Basel Committee agrees to reassess its rules, it could pave the way for greater global coordination on crypto regulation, balancing financial stability with innovation.

The Road Ahead for Basel Crypto Standards

With implementation slated for 2025, regulators still have time to adjust the framework. The growing dialogue between trade groups and policymakers suggests that revisions may be possible, especially if evidence shows that strict rules could inadvertently harm stability rather than enhance it.

Banks, meanwhile, are continuing to explore blockchain-based settlement systems, tokenized bonds, and crypto custody solutions, signaling that institutional adoption is unlikely to slow down—regardless of regulatory hurdles.

Conclusion

The call from Wall Street trade groups to rethink the Basel crypto standards underscores a critical debate at the intersection of regulation, innovation, and global competitiveness. Striking the right balance will determine whether traditional banks play a central role in the future of digital assets or whether crypto finance continues to thrive outside the established banking system.

For investors and institutions alike, the outcome of this regulatory tug-of-war could shape the trajectory of Bitcoin, Ethereum, and tokenized assets for years to come.

Sean Pratt

Sean Pratt is a passionate crypto enthusiast with a sharp eye for emerging technologies and innovative investment strategies. Actively engaged across multiple exchanges, he consistently researches, analyzes, and invests in promising new projects — from disruptive blockchain ventures to trending meme coins. Known for his calculated risk-taking, he achieved an impressive 13X return with the $PEPE token. His investment approach blends long-term vision with meticulous market analysis, leveraging deep insights into cryptocurrency mechanics, global market shifts, and the evolving potential of blockchain innovation.

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