Senators Lummis, Hagerty, and others argue Basel's 1,250% risk weight is excessive; they want technology-neutral capital rules before banks expand crypto activities. Thursday hearing is key.
Six Republican senators are pressing U.S. banking regulators to replace the current capital framework for digital assets with a technology-neutral standard that does not penalize banks solely for using blockchain infrastructure. The push, led by Senator Cynthia Lummis and including Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd, and Jon Husted, came in a letter sent last week to the three top banking regulators – Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill, and Comptroller of the Currency Jonathan Gould.
The request lands ahead of their Thursday testimony before the House Financial Services Committee, and as Congress advances legislation that would expand the on-balance-sheet activities banks can conduct with digital assets.
At the center of the letter is the Basel Committee on Banking Supervision’s 1,250% risk weight for certain crypto holdings. That capital charge, the senators argued, is excessively high and lacks the granularity needed to distinguish between different types of digital asset exposures.
The simple read: senators want to lower capital charges so banks can hold more crypto without setting aside as much capital. The better market read is about calibration methodology. A 1,250% risk weight means a bank must hold $12.50 of capital for every $100 of exposure – far above the typical 8% to 12% for corporate loans or even the 100% weight on unsecured consumer debt. That effectively bans most prudent banks from holding unbacked crypto on their own books, regardless of the asset’s liquidity or volatility profile.
In the letter, the lawmakers pointed to a March joint statement from the Fed, FDIC, and OCC that concluded tokenized securities should generally receive the same capital treatment as their traditional counterparts. The senators argued the same principle should apply consistently to other forms of digital assets. If a tokenized Treasury bond is treated like a Treasury bond, the logic runs, a tokenized equity or commodity should not automatically attract a punitive weight purely because of the wrapper technology.
The letter does not prescribe a specific new number but lays out four principles:
The senators explicitly tied their request to digital asset bills currently in Congress. Those bills, they wrote, “would permit banks to engage in additional on-balance-sheet digital asset activities.” Without clear capital rules beforehand, banks would either face regulatory whiplash or avoid the space entirely. Lummis has also been active defending crypto legislation against criticism. Earlier this week, she pushed back on JPMorgan Chase CEO Jamie Dimon’s claim that the CLARITY Act fails to address anti-money laundering safeguards, telling CNBC that Bank Secrecy Act requirements already apply to digital assets and are part of the bill.
The hearing on Thursday is the next concrete marker. Bowman, Hill, and Gould each have their own histories on crypto.
The question is whether the three agencies will act jointly – as they did in the March tokenization statement – or issue separate proposals. Joint action would signal political alignment; divergence would leave banks navigating a fractured rulebook.
Larger institutions with existing digital asset pilots or equity stakes in crypto firms are most exposed to capital rule changes.
JPMorgan Chase (JPM) , with an Alpha Score of 49/100 (Mixed), is instructive. The bank has tokenized deposits and settlement initiatives but has not taken meaningful proprietary crypto exposure. A 1,250% risk weight on hypothetical positions has acted as a de facto ban. Lower, more calibrated weights could open a path to on-balance-sheet Bitcoin, Ether, or stablecoin collateral – but the bank’s leadership, including Dimon, remains publicly skeptical. The current price of $309.95 (up 3.02% today) reflects the broader bank rally, not crypto-specific optimism.
Other banks affected:
The push aligns with the expanding tokenized real-world asset market, which recently topped $16.6 billion. Most of that is tokenized money-market funds and Treasuries, which already receive favorable capital treatment under the March joint statement. The senators’ letter suggests that the same logic should extend to tokenized equities, commodities, and potentially even unbacked crypto that meets liquidity and custody standards.
Bottom line for traders: The regulatory direction on crypto capital remains a key variable for bank-led tokenization growth. A shift to lower, risk-calibrated weights would unblock institutional participation; a failure to move would keep the current regime intact, favoring non-bank crypto-native platforms.
For now, the ball is with Bowman, Hill, and Gould. Their Thursday testimony will offer the first public signal of whether the agencies intend to move – or hold the line.
Related reading: Tokenized RWA Market Tops $16.6B: Where Capital Is Moving | Coinbase Goes After Binance in Pre-IPO Perps Race | JPM stock page
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.