Six senators want to scrap the rule that keeps banks away from Bitcoin.

@SenLummis Cynthia Lummis and @SenDanSullivan Dan Sullivan are leading a push to rewrite the capital rules that effectively bar US banks from holding $BTC. The two senators, joined by Bill Hagerty, Bernie Moreno, Jon Husted, and Ted Budd, sent a letter to the Federal Reserve, the FDIC, and the OCC calling for a new framework that reflects the actual risk profile of digital assets rather than applying a blanket penalty borrowed from an entirely different corner of finance.

The 1,250% Problem

At the heart of the senators' complaint is a single number. The Basel Committee's prudential standard assigns Bitcoin a 1,250% risk weight, placing it in the most punitive classification in the entire capital framework. The mechanics are stark: that requirement forces banks to back any Bitcoin on their balance sheets at a 1:1 ratio with approved collateral, making it more expensive to hold than virtually any other asset class. For context, cash, physical gold, and government debt carry a 0% risk weight under the same framework. The senators argue the classification was designed for opaque, toxic securitization products, not a liquid, transparently priced asset like Bitcoin, and that it functions less as a calibrated risk assessment than as a back-door prohibition on banks touching crypto.

The letter calls for a technology-neutral, risk-based approach that would give banks the authority to participate meaningfully in digital asset markets while maintaining financial stability. In the senators' own words, "capital treatment should reflect the risk characteristics of the underlying asset, not the technology used to record ownership."

Growing Pressure on Basel

The senators are pushing on a door that is already starting to move. The controversial 1,250% risk weight is facing mounting criticism from industry groups and crypto advocates ahead of a planned regulatory update, and the Basel Committee itself announced an expedited targeted review of its crypto asset standards in late 2025. The Fed's own supervision leadership has also signaled the current weights may not be fit for purpose. The timing aligns with Congress debating broader digital asset legislation under the CLARITY Act, which would expand the role banks can play in crypto markets and makes the capital question more pressing than ever.

Critics of the current regime argue the rules create a quiet but effective chokepoint: not by banning crypto outright, but by making it prohibitively expensive for regulated institutions to participate. Supporters of the status quo point to Bitcoin's history of deep drawdowns and the absence of long-run bank-level loss data as reasons for caution. The Basel Committee's ongoing review will be the next major test of which argument carries more weight.

Sources:
Bitcoin Policy Institute: Basel's 1,250% Mistake
Crypto Times: Pro-Crypto Senators Press Regulators to Replace Basel's Capital Rules
CoinTelegraph: BTC Treasury Executives Call for Reform of 1,250% Risk Weight in Basel III