Crypto Rules Are Getting an Overhaul: Basel Committee Calls for Updates 🏦💸

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Key Highlights

  • The Basel Committee says current crypto rules are ancient and need updates, especially for stablecoins, tokenized assets, and rising institutional interest.
  • Banks grumble about sky-high capital requirements stifling their crypto investments, while regulators scramble to protect the system without ruining all the fun.
  • Global approaches to crypto vary wildly: The US wants to relax the rules, the EU is all about strict licenses, and central bank digital currencies are adding more confusion to the mess.

The Basel Committee’s Chair, Pablo Hernández de Cos, recently warned that the global banking rules governing cryptocurrencies are hopelessly outdated. According to a report from the Financial Times, de Cos said that the framework adopted in 2022 is “so last year” in the fast-moving world of crypto. You see, digital assets evolve quicker than you can say “blockchain.”

In advance of the committee’s annual meeting in Basel, de Cos pointed out that the rapidly increasing use of digital assets by banks and institutions means that it’s high time to reevaluate the rules. “We need to revisit these standards to ensure they balance prudence with the opportunities presented by crypto,” he declared, as if the entire financial system wasn’t already in the middle of a mid-life crisis.

Currently, the Basel rules require banks to hold an eye-watering 1,250% capital buffer for crypto holdings that are not backed by anything substantial-while the humble equity only gets a modest 100% requirement. This is obviously meant to prevent another FTX-style disaster, but it’s like using a sledgehammer to crack a walnut. De Cos, who also used to be the Governor of Spain’s central bank, thinks these measures have made banks more resilient, but maybe, just maybe, they’ve gone a tad overboard.

Stablecoins and tokenized assets-those digital items that function like money-are on the rise, yet the rules still can’t seem to keep up with them. De Cos suggested that future updates might reduce capital requirements for “Group 1” assets (aka those that act like real money) and might even clear up some of the murkiness around custody rules. He just wants to make sure any changes keep the financial system safe without suffocating innovation-because who doesn’t want innovation? Even regulators need a little fun once in a while.

Rules Under Scrutiny

The Basel Committee’s 2021 framework was the result of years of deliberation (and probably many, many cups of coffee), and it was set to roll out next year. However, critics are already fuming, claiming that the rules are way too harsh on digital assets and might push crypto activity into the shadows of unregulated territories. Banks like JPMorgan Chase have been vocally demanding changes, arguing that the sky-high capital requirements make it harder for them to get in on the crypto action.

A senior US bank executive summed it up perfectly: “These rules are like parking a Ferrari in a garage and never letting it out-there’s so much potential, but it’s locked up tight.” You can’t argue with that kind of logic. The Basel Committee, which operates under the Bank for International Settlements, will be considering feedback from regulators around the globe as they mull over any changes.

Global Regulatory Context

And as if things weren’t complicated enough, different countries have taken wildly different approaches to regulating crypto. In the US, the Trump administration (remember that guy?) is taking a more relaxed stance, planning new rules for stablecoins and making it easier for banks to deal with crypto. Meanwhile, across the pond, the European Union is clamping down with strict licensing rules and reserve requirements under its MiCA legislation. The UK is also considering something similar, proving that everyone has an opinion about crypto, and no one can agree on what to do with it.

These regulatory differences highlight the need for Basel to find a middle ground that encourages innovation without letting everything collapse like a poorly executed ICO. Oh, and let’s not forget the central bank digital currencies (CBDCs), which are throwing yet another wrench into the works. Now, public and private crypto are vying for attention, and regulators are stuck in the middle, trying to figure out how to let them play nice together.

US Oversight Shifts

In Washington, Michael Selig, handpicked by Trump to head the Commodity Futures Trading Commission (CFTC), recently faced the Senate’s grilling about how he’d supervise digital assets. His message? “We need clear guidelines and consumer protection-but for the love of all that is holy, let’s not regulate by enforcement.” He argued that this is a golden opportunity to craft a framework that helps software developers thrive and allows new exchanges to pop up without throwing investors under the bus.

Selig’s appointment follows the departure of Brian Quintenz, the previous nominee, and is seen as another sign of the ongoing industry push for clarity on the regulatory front. As Basel ponders its crypto rules, any changes could lower capital requirements for banks holding crypto-but don’t expect these changes to happen overnight. Experts warn that easing restrictions too quickly might invite more risk into the system, and nobody wants another FTX-like catastrophe, right?

As stablecoins and tokenized assets continue to grow, regulators are caught between the desire to encourage innovation and the need to keep the financial system from collapsing under the weight of its own ambition.

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2025-11-20 13:32