Senate Republicans led by Sen. Cynthia Lummis sent a letter last week to Federal Reserve Vice Chair of Supervision Michelle Bowman, Federal Deposit Insurance Corporation Chair Travis Hill, and Comptroller of the Currency Jonathan Gould, urging them to establish new capital standards for digital assets. The lawmakers criticized the Basel Committee on Bank Supervision's 1,250% risk weight standard for digital assets, calling for a technology-neutral framework that accurately reflects opportunities and risks. The push comes as Congress considers broader digital asset legislation that would expand banks' ability to engage in balance-sheet digital asset activities.
Lawmakers Criticize Basel Committee 1,250% Risk Weight Standard
The senators challenged capital standards from the international Basel Committee on Bank Supervision that assigned a 1,250% risk weight on digital assets. Risk weight determines how much capital a bank must hold against a certain asset, with riskier assets requiring larger capital buffers. The Basel Committee, part of the Bank for International Settlements, is a global standard-setting body composed of 45 central banks and banking supervisors, including U.S. regulators.
Letter Addresses Three Financial Regulatory Agency Leaders
The letter was sent to Federal Reserve Vice Chair of Supervision Michelle Bowman, Federal Deposit Insurance Corporation Chair Travis Hill, and Comptroller of the Currency Jonathan Gould. All three regulators are testifying in front of the House Financial Services Committee on Thursday morning. A statement on the letter was released on Thursday.
Senators Request Technology-Neutral Capital Framework
"Any proposed capital treatment of on-balance sheet digital asset activities should accurately reflect the opportunities and risks of digital assets---and be based on, to the extent possible, a technology-neutral approach that gives banks the authority to participate meaningfully in digital asset markets," the lawmakers said in the letter. Six senators signed the letter: Cynthia Lummis, Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted.
Letter References March Joint Statement on Tokenized Securities
The letter references a joint statement from March from the FDIC, the Federal Reserve, and the OCC that clarified tokenized securities should generally have the same capital treatment as non-tokenized forms of the asset. "That principle should apply consistently---including to other digital assets," the lawmakers said.
Congressional Digital Asset Legislation Under Consideration
The senators noted that Congress is considering broader digital asset legislation that would authorize banks to engage in on-balance sheet activities with digital assets. "This legislation authorizes banks to engage in a number of on-balance sheet activities with digital assets, which will undoubtedly require capital guidance," the senators said.
FAQ
What did Senate Republicans request from financial regulators?
Senate Republicans led by Sen. Cynthia Lummis sent a letter last week to Federal Reserve Vice Chair Michelle Bowman, FDIC Chair Travis Hill, and Comptroller Jonathan Gould, urging them to establish new capital standards for digital assets based on a technology-neutral approach.
Why did the senators criticize the Basel Committee standards?
The lawmakers criticized the Basel Committee on Bank Supervision's 1,250% risk weight standard for digital assets, arguing that capital treatment should accurately reflect the opportunities and risks of digital assets rather than applying such a high risk weight.
Which senators signed the letter to financial regulators?
Six senators signed the letter: Cynthia Lummis, Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted.
