Senate Republicans Urge Regulators to Clarify Bank Capital Standards for Crypto Activities

A group of Senate Republicans is calling on U.S. financial regulators to provide clearer capital standards for companies and banks involved in crypto-related activities. According to Cointelegraph, Senator Cynthia Lummis said on Thursday that she led the group in sending a May 27 letter to Federal Reserve Vice Chair for Supervision Miki Bowman, Federal Deposit Insurance Corp. Chairman Travis Hill, and Comptroller of the Currency Jonathan Gould. The senators praised the agencies’ March guidance clarifying the capital treatment of tokenized securities, but urged regulators to extend that work toward “a clear and fair capital treatment” for the on-balance sheet treatment of digital assets. They argued that current international standards effectively discourage banks from holding crypto because they require banks to maintain reserve assets exceeding the value of their digital asset holdings, which the senators described as a “de facto ban.”

The lawmakers also criticized the Basel Committee on Bank Supervision’s standards assigning a 1,250% risk weight to crypto, saying the figure was “not derived from a calibrated assessment of the actual risk profile of digital assets.” They said any future capital treatment for on-balance sheet digital asset activities should reflect both opportunities and risks, and should be as technology-neutral as possible so banks can participate meaningfully in digital asset markets. The letter comes as senators prepare to act on a crypto market structure bill known as the CLARITY Act, with Senate leaders pushing to pass it ahead of the midterms in November to avoid having to reintroduce it in the next session if it fails to advance. The current version would allow banks to use digital assets and blockchain for payments, lending, custody, and trading, and the senators said such legislation would “undoubtedly require capital guidance,” urging regulators to begin developing a new framework.

The letter was also signed by Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted. Debate on the Senate’s crypto bill is slated to resume this week after the Senate returned from recess. The legislation would define how the Securities and Exchange Commission and the Commodity Futures Trading Commission regulate crypto markets and companies. The Senate Banking and Agriculture Committees have each passed their own versions addressing securities and commodities, and the full Senate will need to reconcile differences between the bills. Lawmakers have also raised additional issues—such as stablecoins, ethics, and crypto developers—that may need to be addressed for the bill to secure the 60 votes required to pass the Senate without prolonged debate that could leave it stalled indefinitely.