Financial Industry Calls for Reassessment of Basel Crypto Standards

On August 19, 2025, a coalition of leading financial industry associations, including the Global Financial Markets Association (GFMA), the Institute of International Finance (IIF), and the International Swaps and Derivatives Association (ISDA), issued an open letter to the Basel Committee on Banking Supervision. The coalition urged a reconsideration of the forthcoming crypto asset standards for banks, set to take effect in January 2026. They argue that the rapid evolution and integration of the crypto market into mainstream finance render the existing standards overly conservative and economically impractical for banking institutions.

The Basel Committee, comprising global regulators and central banks, introduced these rules in 2022 to manage risks associated with banks' exposure to cryptocurrencies. The standards categorize crypto assets into two groups:

• Group 1: Crypto assets that meet specific conditions, such as tokenized traditional assets and stablecoins with effective stabilization mechanisms. These are eligible for treatment under the existing Basel Framework.

• Group 2: All other crypto assets, including unbacked cryptocurrencies and stablecoins that fail to meet Group 1 criteria. These are subject to more stringent capital requirements due to their higher risk profile.

Banks' exposure to Group 2 assets is generally limited to below 1% of Tier 1 capital, with more conservative treatments applied if this threshold is exceeded. (bankingsupervision.europa.eu)

In their letter, the industry groups contend that the crypto market has undergone significant changes since the standards were introduced. They argue that the current rules are overly conservative and economically unviable for banks, potentially hindering their ability to participate meaningfully in the crypto asset market. The groups have called for a temporary pause in the implementation process to allow for a reevaluation of the standards with updated data. (reuters.com)

The letter states, "The Cryptoasset Standard's restrictive qualification standards, combined with otherwise punitive market and credit risk capital treatments, effectively make it uneconomical for banks to meaningfully participate in the cryptoasset market." (reuters.com)

Since the Basel Committee's initial proposal, there have been notable regulatory developments:

• European Union: The Markets in Crypto-Assets (MiCA) regulation, adopted in May 2023, established a comprehensive framework for crypto assets, aiming to protect users and investors while fostering innovation. MiCA became fully applicable in December 2024.

• United States: Under President Donald Trump's administration, U.S. regulators have adopted a more favorable stance towards cryptocurrencies, facilitating banks' engagement in crypto-related activities. (reuters.com)

These developments indicate a trend towards greater integration of crypto assets into mainstream finance, prompting industry bodies to advocate for regulatory frameworks that reflect the current market landscape.

The industry's push for revised crypto asset standards underscores the growing significance of cryptocurrencies in the global financial system. Overly restrictive regulations could stifle innovation and limit banks' ability to offer crypto-related services, potentially driving such activities to less regulated entities. Conversely, insufficient regulation may expose the financial system to risks associated with crypto assets, such as volatility and security concerns.

As the January 2026 implementation date approaches, the Basel Committee faces mounting pressure from the financial industry to reassess its crypto asset standards. The outcome of this deliberation will have significant implications for the integration of crypto assets into the global financial system and the role of traditional banks in this rapidly evolving market.