Bitcoin Regulatory Controversy Escalates: BPI Criticizes Basel Rules for Treating BTC as "Toxic Asset"

March 13 News: The Bitcoin Policy Institute (BPI) announced that it will submit public comments on the upcoming new banking capital rules issued by U.S. regulators, opposing the Basel Committee on Banking Supervision’s high-risk weight standards for Bitcoin. BPI believes that these rules label Bitcoin as a “toxic asset,” potentially restricting banks from engaging in crypto-related activities.

Conner Brown, Managing Director of BPI, posted on social media that the organization will closely monitor the Federal Reserve’s upcoming proposal and urges regulators to reassess Bitcoin’s risk classification on bank balance sheets. Under the current Basel framework, Bitcoin is assigned a risk weight of up to 1250%, far higher than most traditional asset classes.

According to Basel capital rules, a 1250% risk weight means banks holding Bitcoin on their balance sheets must hold capital in a 1:1 ratio to support those assets. This significantly increases the cost for banks to hold Bitcoin and makes it more difficult for financial institutions to provide services to Bitcoin companies or holders. In contrast, cash, physical gold, and government bonds typically have a risk weight of 0%.

Michelle Bowman, Vice Chair of the Federal Reserve responsible for regulatory affairs, stated that the Fed plans to propose related implementation rules in the coming weeks to advance the final phase of the Basel agreement. She noted that the framework aims to improve the efficiency of bank regulation while ensuring the safety and stability of the financial system.

However, BPI believes the current risk classification has obvious issues. Conner Brown previously pointed out in a research article that categorizing Bitcoin as a highest-risk asset is a “serious misclassification.” In the Basel Committee’s 2021 proposal, crypto assets were classified as high-risk second-category assets, with banks limited to holding no more than 1% of their Tier 1 capital.

Industry observers note that if the regulatory framework remains unchanged, banks’ participation in the Bitcoin market may continue to be limited, affecting traditional financial institutions’ strategies in the digital asset space. As U.S. regulators prepare to release specific implementation details, Bitcoin’s position within the global banking regulatory system may become an important topic in future financial policy discussions.