US Federal Reserve to Propose Basel III Framework with Bitcoin Risk Weight

The US Federal Reserve is preparing to release a proposal that would significantly impact how banks interact with Bitcoin. According to sources, the proposal will outline the implementation of the Basel III framework in the US, which includes a rule that assigns a 1,250% risk weight to Bitcoin holdings by banks.

This means that banks would be required to hold capital equal to the full value of their Bitcoin exposure, making significant holdings economically difficult. The move has been criticized by industry voices for discouraging banks from offering services around Bitcoin, including trading desks and lending against Bitcoin collateral.

The Basel Committee's global crypto framework divides digital assets into categories, with Bitcoin landing in the harshest one: Group 2b, reserved for cryptoassets regulators consider difficult to hedge and inherently volatile. Under this classification, a 1,250% risk weight is applied, which is the maximum penalty allowed under the capital rulebook.