Bitcoin bond company CEO Pierre Rochard warned U.S. banking regulators that their sweeping Basel III capital rewrite doesn’t address how bitcoin-related activities should be treated, a gap he says could create legal risk and shape how much capital banks must hold against the asset.
Formally Comment In a March 29 submission to the U.S. Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, Rochard said the agencies cannot finalize rules that effectively determine the capital treatment for bitcoin (BTC)-related activities without clearly explaining the framework and evidence behind that treatment.
Regulators March 19 SuggestionsA package that would completely ignore the current US bank capital framework did not once mention bitcoin, crypto or digital assets. It covers credit risk, market risk, operational risk and counterparty exposures for the largest US banks, but leaves uncertainty as to how the existing categories apply to BTC holdings, lending, custody and derivatives.
The difference matters because Basel already imposes Capital treatment of certain unbacked crypto exposures, but the US proposals do not specify whether this framework would apply to bitcoin-related activities. For banks, this leaves the economics of custody, lending, derivatives and direct holdings unresolved.
Rochard argued that regulators cannot leave the question unresolved and said a final rule that tacitly imposes (or preserves) a capital treatment for Bitcoin-related activities without a clear explanation could face legal risk.
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He pointed to the Basel Committee’s cryptoasset framework, called SCO60, which assigns a 1,250% risk weight to unbacked cryptoassets like Bitcoin. According to Rochard, US regulators should clarify whether they intend to adopt the standard, apply elements of it selectively, or instead rely on existing domestic capital categories.
Related: Bitcoin Advocate Group to Fight Basel’s ‘Toxic’ Treatment of Cryptocurrency
Rochard noted that the same agencies have recently been outspoken about other digital assets. On March 5, they issued a Tokenized Securities FAQ stating that eligible tokenized securities should generally receive the same capital as their non-tokenized counterparts and that the capital framework is “technology neutral”, giving banks clear guidance on this front. In contrast, there is still no comparable explanation for how bitcoin exposure should be treated.
Without this clarity, banks will be left to interpret how the rules apply to direct Bitcoin holdings, Bitcoin-collateralized loans, custody services and derivatives exposures, increasing uncertainty across the industry.
Prior to the proposal’s release, some analysts expected that the re-proposal could reduce capital requirements and potentially unlock liquidity for bitcoin-related activities.
“The fat system must stop sabotaging itself,” Rochard said in his comments to X. “Bitcoin banking rules will improve bank net interest margins and lower interest rates for borrowers.”
Cointelegraph reached out to Rochard for comment, but had not received a response by publication.
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