Changing Basel rules could unlock ‘huge’ Bitcoin liquidity: Analyst

A scheduled update to global bank capital rules could fundamentally reshape how traditional financial institutions interact with Bitcoin.

Market analyst Nic Puckrin says a lower risk rating for Bitcoin under the revised Basel III framework could trigger a “huge” influx of liquidity into the asset, potentially opening the door for banks to finally integrate Bitcoin into mainstream financial services.

Under the existing Basel rules, Bitcoin and similar digital assets carry a 1,250% risk weight. This means banks must hold $1 in reserve for every $1 of Bitcoin on their balance sheets, making it “almost impossible” for them to offer Bitcoin-related services to clients.

The Federal Reserve has opened a 90-day public comment window on how the revised rules will be implemented in the United States. Industry executives and trade associations have formally called for recalibration, arguing the current treatment misprices risk and effectively locks banks out of the digital asset economy.

In this analysis, we’ll break down what the Basel III crypto framework actually requires, why industry executives call it a “quiet chokepoint,” what’s changing in 2026, and what a lower risk weight could mean for Bitcoin’s institutional adoption.

What is the Basel Framework?

The Global Banking Rulebook

The Basel Framework, established by the Basel Committee on Banking Supervision (BCBS) at the Bank for International Settlements (BIS), sets global standards for how much capital banks must hold against different types of assets. These rules are designed to ensure banks can absorb losses without failing – protecting depositors and the broader financial system.

How Risk Weights Work

Under Basel rules, assets are assigned “risk weights” based on their perceived riskiness. A bank’s total risk-weighted assets (RWA) determine its minimum capital requirements. The math is straightforward:

The Crypto Framework (SCO60)

In December 2022, the Basel Committee finalized its prudential treatment for cryptoassets (SCO60), creating a two-tiered classification system:

The Effective Date

These rules took effect on January 1, 2026, with banks now required to disclose detailed information about their cryptoasset exposures under new reporting templates.

The 1,250% Risk Weight: A ‘Quiet Chokepoint’

What 1,250% Actually Means

A 1,250% risk weight is the highest category available under the Basel Framework – reserved for assets considered so risky that banks must hold capital equal to the full value of their exposure. For Bitcoin, this means:

• $1 of Bitcoin on balance sheet → $1 of capital must be held in reserve
• $100 million in Bitcoin custody → $100 million in capital tied up

The Economic Reality

Chris Perkins, president of investment firm CoinFund, describes this as a “very nuanced way of suppressing activity” – more subtle than outright bans, but equally effective:

“It’s a very nuanced way of suppressing activity by making it so expensive for the bank to do those activities.” – Chris Perkins, CoinFund

Why It’s Called a ‘Chokepoint’

The capital charge directly attacks bank profitability. Holding Bitcoin would reduce banks’ return on equity – a critical metric for investors. In practice, this makes crypto custody and trading services economically unviable for traditional banks, funneling institutional custody to specialized non-bank firms like Coinbase and BitGo.

The 1-2% Exposure Cap

Beyond the risk weight, Group 2 cryptoassets are also subject to exposure limits:

• Tier 1 capital limit: Group 2 exposures capped at 1% of bank’s Tier 1 capital
• Hard cap: Absolute limit of 2% of Tier 1 capital

For a bank with $100 billion in Tier 1 capital, total Group 2 crypto exposure is expected to stay below $1 billion. If it exceeds $2 billion, all Group 2 exposure would be subject to the harsher Group 2b treatment.

Perkins’ Assessment

“The Basel capital requirements are a covert form of choking off the crypto industry, and are more subtle than efforts to debank crypto companies under Operation Chokepoint 2.0.”

How Bitcoin’s Treatment Compares to Other Assets

The Disparity is Stark

Jeff Walton, chief risk officer at Bitcoin treasury company Strive, highlights the dramatic difference in how Basel treats various assets:

Walton’s Verdict

“Risk is mispriced.”

The Irony of Gold vs Bitcoin

Gold, physically heavy, expensive to store, and difficult to transport, carries a 0% risk weight. Bitcoin, instantly transferable, cryptographically verifiable, and globally accessible, carries a 1,250% weight. This disparity reflects regulators’ caution toward novel assets rather than any objective measure of risk.

Investment-Grade Corporate Bonds

Even investment-grade corporate bonds, which carry default risk, require only up to 75% risk weight. A bank could hold $100 million in Apple or Microsoft bonds with minimal capital impact, while $100 million in Bitcoin would require $100 million in capital reserves.

The 2026 Update: What’s Changing?

Scheduled Revision

The Basel III rules are due for an update in 2026. This isn’t speculative, it’s a scheduled part of the regulatory process. The Basel Committee itself has signaled openness to a “different approach”.

Chairman’s Statement

In November 2025, Basel Committee Chair Erik Thedeen confirmed the committee is actively considering revisions to the 2022 guidance, directly challenging the 1,250% risk weight. The committee is preparing to publish changes in 2026.

What Could Change

The Fed’s Role

The Federal Reserve has opened a 90-day public comment window on how the revised rules will be implemented in the United States. This gives the crypto industry a direct channel to advocate for more favorable treatment before the updated rules are finalized.

Puckrin’s Take

“The Fed just announced a proposal on how these rules will be implemented in the US, with a 90-day public comment window. If BTC’s treatment improves even slightly, it could open the door for banks to finally integrate BTC into the financial system.”

Industry Advocacy: Trade Groups Push for Recalibration

Joint Trades Letter (August 2025)

A coalition of global financial trade associations – including the Bank Policy Institute, Futures Industry Association, ISDA, SIFMA, and the Institute of International Finance – formally petitioned the Basel Committee to pause implementation and reconsider key provisions.

Their Core Argument

“The Cryptoasset Standard’s restrictive qualification standards, combined with otherwise punitive market and credit risk capital treatments, effectively make it uneconomical for banks to meaningfully participate in the cryptoasset market.”

Specific Recommendations

The joint trades urged the BCBS to:

1. Eliminate the permissioned/permissionless distinction – Prudential requirements should reflect risk, not ledger type
2. Recognize regulated stablecoins as eligible financial collateral
3. Revise the 1-2% exposure cap – Current limits discourage meaningful bank participation
4. Recalibrate risk weights – Suggesting 54% based on empirical data (versus current 1,250%)
5. Permit internal models – Allowing banks to apply existing risk frameworks to crypto
6. Remove outdated segmentation rules – Recognize diversification benefits across cryptoassets

Strategy CEO Phong Le’s Statement

Phong Le, CEO of Strategy, called for rethinking how banks treat Bitcoin exposures under Basel rules, stating that the framework “fundamentally shapes how banks interact with digital assets, including Bitcoin.” He linked this directly to US ambitions:

“If the US wants to become the world’s crypto capital, our implementation of Basel capital treatment warrants careful review.”

Conner Brown’s Critique

Conner Brown, strategy director at the Bitcoin Policy Institute, emphasized the practical impact:

“It’s hard to overstate how much of a bad policy mistake this is. The 1,250% risk weight means banks must hold $1 in capital for every $1 of Bitcoin exposure, while gold has essentially zero capital cost.”

Brown argued the policy erroneously penalizes Bitcoin, which has operating characteristics favorable for risk management, including continuous trading, rapid auditability, fixed supply, and transparent pricing.

Expert Perspectives: What Analysts Are Saying

Nic Puckrin (Market Analyst)

“A lower risk rating for Bitcoin under the revised Basel III framework could trigger a ‘huge’ influx of liquidity into the asset.”

Chris Perkins (President, CoinFund)

“The Basel capital requirements are a covert form of choking off the crypto industry, and are more subtle than efforts to debank crypto companies under Operation Chokepoint 2.0. It’s a very nuanced way of suppressing activity by making it so expensive for the bank to do those activities.”

Jeff Walton (CRO, Strive)

“Risk is mispriced.”

Erik Thedeen (Basel Committee Chair, November 2025)

Confirmed the committee is considering a “different approach” to the 1,250% risk weight, directly challenging the existing framework.

Joseph Edwards (Head of Research, Enigma Securities)

“If something is to be treated as a universal asset, it effectively needs to meet quorum with regards to how many parties will handle it. This should move the needle somewhat on that.”

Federal Reserve Comment Window: A Critical Opportunity

What’s Happening

The Federal Reserve has opened a 90-day public comment period on how the revised Basel rules will be implemented in the United States. This is a formal rulemaking process – not just a consultation .

Why It Matters

The Window of Opportunity

Puckrin notes that even a “slight” improvement in how regulators treat Bitcoin could open the door for banks to finally integrate BTC into mainstream financial services. The comment window gives the industry a direct channel to push for meaningful change.

How to Participate

Stakeholders can submit comments through the Federal Reserve’s rulemaking portal. Industry groups are likely to coordinate comment campaigns aligned with the joint trades’ recommendations.

Potential Outcomes

As CryptoSlate’s analysis outlines, the Fed proposal could take several paths :

What a Lower Risk Weight Could Mean for Bitcoin

The Math of Unlocking Liquidity

If the risk weight were reduced from 1,250% to, say, 50% – comparable to investment-grade corporate bonds—the capital required for Bitcoin exposure would drop from 100% to roughly 4% of exposure value.

Flow Scenarios

The Institutional Gateway

A lower risk weight wouldn’t just allow banks to hold Bitcoin – it would signal regulatory acceptance, potentially triggering allocation from pension funds, endowments, and insurance companies that require Basel-compliant counterparties.

The Structural Shift

Currently, capital rules determine what banks can do economically, not just what they can do legally. If the capital treatment remains harsh, large banks will still have a strong incentive to avoid meaningful Bitcoin inventory, financing, and market-making services. If it softens, the long-run effect could be more bank custody, financing, execution, and infrastructure for Bitcoin.

Puckrin’s Vision

“Even a modest improvement in how regulators treat Bitcoin could open the door for banks to integrate Bitcoin into mainstream financial services.”

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Regulatory developments are subject to change. Always consult with qualified professionals before making investment decisions.

This analysis reflects March 2026 developments. Regulatory processes are fluid – check official sources for current information.

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