Senator Cynthia Lummis and five other Republican senators have asked U.S. financial regulators to reconsider the capital standards banks face when holding or offering digital asset services. Their argument is direct: current rules place unnecessary limits on banks that want to enter the crypto market, and the framework does not reflect actual risk with enough precision.
Letter sent to the Fed, FDIC, and OCC
The senators addressed their letter to Federal Reserve Vice Chair for Supervision Michelle Bowman, Federal Deposit Insurance Corporation Chair Travis Hill, and Comptroller of the Currency Jonathan Gould. They urged the agencies to build a regulatory framework that better matches the real risks and potential opportunities tied to digital asset activity, rather than relying on capital requirements they see as overly restrictive.
The signatories were Cynthia Lummis, Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted. The group’s request shows growing Republican support for revisiting regulatory treatment that many in the industry consider too limiting.
Basel treatment of digital assets is the main target
At the center of the dispute is the Basel Committee on Banking Supervision’s treatment of certain digital assets, which currently carries a 1,250% risk weight. That standard sharply increases the amount of capital banks must hold against those exposures, raising the cost of participating in the sector through regulated channels.
The senators questioned the logic of placing digital assets in the highest risk-weight category based on broad classification alone. In their view, regulators should assess these assets according to their actual characteristics. They said the current approach may discourage regulated institutions from offering digital asset services even as investor and business demand for blockchain-based financial products continues to grow.
Lawmakers point to the agencies’ March statement
The letter also referenced a joint statement issued in March by the Federal Reserve, FDIC, and OCC. That statement said tokenized securities generally should receive the same capital treatment as their traditional, non-tokenized versions because the underlying assets remain the same. The senators supported that position and argued that a similar principle should be applied to other digital assets where appropriate.
They also said any future capital framework should remain technology-neutral, giving banks a meaningful chance to participate in digital asset markets without facing what they described as disproportionate regulatory burdens.
Pending legislation raises the stakes for regulators
The request lands as Congress considers digital asset legislation that would expand the ability of banks to conduct several crypto activities on their balance sheets. That makes clearer capital guidance more urgent. The senators said updated standards are needed as lawmakers continue advancing broader reforms and as banks are expected to take on a larger role in custody, payments, and other blockchain-related services.
The latest push from Senate Republicans adds pressure on regulators to prepare for a system in which banks may have broader authority to handle cryptocurrencies and tokenized assets. The question now is whether current capital standards can still fit that direction.