Global Banking Bodies Press Basel to Revise Crypto Banking Rules
🔑 Key Takeaways
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Leading financial associations (GFMA, IIF, ISDA) urge the Basel Committee on Banking Supervision (BCBS) to revise upcoming crypto rules.
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Current framework, drafted in 2022, imposes punitive capital charges that could block banks from crypto markets.
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Groups argue crypto has since matured with ETFs, institutional adoption, and demand for custody and settlement services.
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The debate echoes Basel’s long history of shaping global banking standards after financial crises.
🗞 Main Story
A coalition of heavyweight financial associations—including the Global Financial Markets Association (GFMA), the Institute of International Finance (IIF), and the International Swaps and Derivatives Association (ISDA)—has formally called on the Basel Committee on Banking Supervision (BCBS) to rethink its upcoming rules on banks’ crypto activities.
The Basel Committee, headquartered at the Bank for International Settlements (BIS) in Switzerland, has been setting global banking capital standards since the 1970s. Its rules—known as Basel I, II, and III—were created to prevent banking collapses by requiring lenders to hold capital buffers against risky assets. These standards are adopted globally, shaping how banks operate across borders.
The draft framework for crypto, finalized in 2022, classified most digital assets as extremely high-risk, applying 1,250% risk weights. In practice, this means banks would need to hold $1.25 in capital for every $1 of crypto exposure—a de facto prohibition. The new rules are set to take effect in 2026.
However, the industry argues this framework is outdated. Since 2022, crypto markets have seen dramatic institutionalization:
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Bitcoin and Ethereum ETFs now hold hundreds of billions in assets under management.
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Pension funds, asset managers, and corporates are seeking custody, lending, and settlement services from banks.
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Traditional financial rails are merging with digital infrastructure at an unprecedented pace.
By maintaining overly punitive rules, critics say Basel risks pushing crypto activity offshore, where weaker regulation could increase instability and harm consumers. The associations instead propose risk-sensitive models, where banks can use stress-tested frameworks rather than blanket prohibitions.
Why this matters: Basel standards have historically determined which businesses banks can and cannot pursue. Just as past Basel reforms reshaped mortgage lending and derivatives trading after the 2008 financial crisis, these crypto rules could decide whether global banks play a central role in digital assets—or remain sidelined.
🔬 Expert Opinions
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Timothy Adams (President, IIF):
“Crypto markets have evolved far beyond where they were in 2022. Rules must be recalibrated to avoid choking legitimate banking services.” -
Scott O’Malia (CEO, ISDA):
“Risk management, not prohibition, should be the guiding principle for crypto regulation.” -
Sheila Bair (Former Chair, U.S. FDIC):
“Basel rules carry enormous weight globally. Overly harsh treatment of crypto could unintentionally replicate the very shadow-banking risks regulators seek to avoid.”
🌟 Implications
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Banking Integration: If Basel softens its stance, global banks could finally offer large-scale crypto custody, lending, and settlement.
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Liquidity Expansion: Institutional entry would deepen liquidity and integrate crypto with mainstream markets.
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Regulatory Arbitrage: Overly strict rules risk pushing activity to offshore, underregulated jurisdictions.
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Systemic Risk Balance: The challenge is finding a middle ground—managing volatility without banning banks from the sector.
📝 Editorial Opinion
🏦 Basel: The Silent Architect of Modern Finance
Most retail investors have never heard of the Basel Committee, yet it quietly dictates the architecture of global banking. Basel I (1988) standardized capital ratios. Basel II (2004) introduced risk-weighting for complex products. Basel III (2010), forged in the aftermath of the 2008 crisis, forced banks to hold more capital to avoid collapses like Lehman Brothers. Each round reshaped global finance. Now, crypto faces the same gauntlet.
⚡ Crypto’s Maturity vs. Basel’s Lag
The real tension here is timing. In 2022, when Basel’s crypto rules were drafted, Terra-LUNA had just imploded and FTX’s downfall was looming. Fear drove policy. Fast forward to 2025: regulated ETFs, institutional custody, and stablecoin settlements dominate headlines. The mismatch is glaring. Basel rules reflect yesterday’s chaos, not today’s market reality.
🌍 The Stakes: Inclusion or Exile
If Basel does not adapt, banks may abandon the space, leaving crypto in the hands of offshore exchanges and loosely regulated entities. That outcome risks repeating history: a shadow banking system thriving outside official oversight, exactly what Basel was created to prevent. On the other hand, a recalibrated framework could fold crypto into the safety net of traditional banking—capital buffers, audits, supervision—making digital assets safer for everyone.
⚖️ CryptoQuibbler’s Verdict
The battle over Basel is not about ideology, but about who gets to control the future of money. Denying banks entry does not eliminate crypto; it only shifts activity elsewhere. History shows that when regulators overreach, markets adapt in the shadows. The smarter path is recalibration, not prohibition. For once, Basel must learn from its own history.
📘 Key Term Explanations
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Basel Committee on Banking Supervision (BCBS): Global body under the BIS that sets minimum banking capital standards.
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Risk weight: Percentage of capital banks must hold against a specific asset class. Higher risk weight = more restrictive.
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1,250% risk weight: A regulatory classification effectively making an asset “prohibitively expensive” for banks to hold.
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Custody services: Banks holding crypto assets securely for clients.
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Regulatory arbitrage: Practice of shifting activity to jurisdictions with weaker rules.
🛬 Sources
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Reuters – “Finance Industry Bodies Call for Changes to Crypto Rules for Banks”
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BIS – “History of the Basel Committee”
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CoinDesk – “Why Basel’s Crypto Rules Matter”
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