Strategy CEO Phong Le is calling for a rethink of how banks are required to charge large amounts of bitcoin under Basel-style rules, arguing that the current treatment of risk mitigation is making it impossible for regulated institutions to deal with digital assets at all.
The catalyst was a chart shared on X that labeled bitcoin “unsecured crypto exposure” with a “standard risk weight” of 1,250% under the established “Illustrative Basel III-Style” approach, corresponding to a 0% weighting of cash, physical gold, and US Treasuries.
Capital Penalty for Bank Bitcoin Exposure
Le framed the issue as structural rather than political, pointing to the way in which global financial regulations come into play in regulating national banks. “The Basel Accords set global banking capital standards and asset risk assessment rules. These frameworks shape in a tangible way how banks interact with digital assets, including bitcoin,” he wrote. “They were developed by the Basel Committee of central banks and regulators in all 28 jurisdictions – the US being one.”
He tied that directly to Washington’s stated wishes for crypto leadership. “If the US wants to become the Crypto Capital of the World, our implementation of Basel capital treatment should be carefully reviewed,” said Le.
Jeff Walton, who posted the photo quoted by Le, summarizes the difference in vague numbers: “Basel III asset risk weights: Gold: 0% Public equity: 300% Bitcoin: 1,250%,” adding that if the US wants to be the “crypto capitol,” “banking rules need to change,” because “Risk has no price.”
The chart itself provides a ladder of “normal weights” of risk across asset classes. Reserves and central bank deposits remain at 0%, physical gold is at 0%, and sovereign debt such as US Treasuries (USD, US bank) is also at 0%. Investment grade corporate debt is shown in the range of 20–75%, unrated corporate debt at 100%, high yield at 150%, public equity at 250–300%, and private equity at 400%+. Bitcoin is sidelined at 1,250%.
Conner Brown, Head of Strategy at the Bitcoin Policy Institute, said the practical effect is to make bitcoin banking more expensive. “It is hard to overstate how bad this is a policy mistake,” he wrote. “Banks are required to set aside capital based on how risky the regulators think the asset is. The higher the ‘risk weight,’ the more expensive it is for the bank to hold.”
Brown explained the 1,250% figure as translating into a single capital requirement relative to the exposure. In his words, bitcoin’s treatment “means banks have to hold $1 of cash for every $1 of Bitcoin exposure,” while gold is treated “similarly to cash” “without the big costs.”
He also pushed back on the principle that bitcoin should be penalized in relation to assets, pointing to operational features that he sees as favoring risk management and market performance, including continuous trading, rapid audits, concentrated supply, rapid global settlement, and transparent pricing. He went on to say that the result is that regulators have effectively discouraged banks from providing custody and related services to companies and individuals within the regulated area.
Brown said the negative effects extend beyond bank balance sheets to competitiveness. He pointed out that the framework diverts work to “non-banking and offshore companies,” which he described as carrying the greatest risk, and warned that failure to fix this approach could leave American institutions in a bad light around the world.
At press time, Bitcoin traded at $67,857.
The featured image was created with DALL.E, a chart from TradingView.com
Planning process because bitcoinist focuses on delivering well-researched, accurate, and unbiased content. We maintain strict sourcing standards, and each page is diligently reviewed by our team of senior technical experts and experienced editors. This process ensures the integrity, relevance, and value of our content to our readers.
