The letter was led by Senator Cynthia Lummis and co-signed by Senators Bill Hagerty, Dan Sullivan, Bernie Moreno, Ted Budd, and Jon Husted. It was addressed to Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill, and OCC Comptroller Jonathan Gould. The senators called for a technology-neutral, risk-based approach to capital treatment, one that matches how the same three agencies handled tokenized securities in joint guidance issued in March 2026.

The 1,250% Problem

At the center of the dispute is a capital rule set by the Basel Committee on Banking Supervision, a body of 45 central banks and supervisory authorities that establishes global banking standards. Under its framework, which took effect on January 1, 2026 (itself a one-year extension from an original 2025 implementation deadline), most cryptocurrencies including Bitcoin and Ether fall into a category called Group 2b assets.

Banks are required to hold capital equal to 1,250% of their risk-weighted exposure to these assets. In practice, this means a bank must set aside $1.25 in capital for every $1.00 worth of crypto it holds or facilitates. The framework also imposes two exposure limits: a hard cap prohibiting Group 2b holdings from exceeding 2% of Tier 1 capital, and a lower soft cap of 1% of Tier 1 capital that functions as an earlier warning threshold, making the effective constraint tighter than the headline limit alone suggests.

The senators described this as a "de facto ban" on meaningful bank engagement with digital asset markets. Without a realistic path to profitability at those capital levels, most regulated banks have little economic incentive to offer crypto custody, trading, or settlement services. That conclusion reflects this publication's own reading of the framework's economics rather than a claim attributed to any single external source, though no public analysis disputes the basic arithmetic.

On the same day the letter was sent, Bowman testified before the House Financial Services Committee and appeared to signal openness to reform. "I want to make sure that banks are also able to engage in these activities from your bank," she said, adding that banks should be able to "understand and implement" crypto services "if you choose to do so," and describing such services as "critical activities."

SAB 122 Closed One Door; Basel Remains

The capital treatment issue is not new, but it has taken on fresh urgency now that a separate barrier has been removed. The SEC's Staff Accounting Bulletin 121, issued in 2022, had required banks to record customer-held crypto as liabilities on their own balance sheets, stacking an additional capital burden on top of the Basel rules. Congress voted in 2024 to repeal SAB 121, but President Biden vetoed that measure. The SEC ultimately accomplished through regulatory guidance what legislation could not, rescinding the bulletin through SAB 122 in December 2024.

With that obstacle gone, the Basel capital rules have emerged as the most prominent remaining regulatory constraint on bank entry into crypto, though other barriers including state licensing requirements, AML/BSA compliance demands, and reputational risk also persist.

The senators' letter lands in the same week the Digital Asset Market Clarity Act, known as the CLARITY Act, is awaiting a full Senate floor vote. That bill cleared the Senate Banking Committee 15 to 9 on May 14, 2026, and is the product of more than six months of bipartisan negotiations. It would establish a formal division of oversight between the SEC and the CFTC and allow banks to conduct a broader range of digital asset activities. The practical concern is that expanded permissions under the CLARITY Act mean little if the underlying capital math makes those activities economically unworkable.

International Pressure on Basel

The senators also cited growing resistance to the Basel crypto framework beyond U.S. borders. The Bank of England declined to implement the Group 2b standards in its current form.

The Basel Committee itself announced a targeted review of its cryptoasset rules in late 2025. That review indicates the standard-setting body is revisiting the framework, though the Committee has not publicly characterized its existing rules as flawed.

What It Means Outside the United States

For markets in Africa and South Asia, U.S. bank capital rules carry indirect but real weight. U.S.-chartered banks serve as correspondent anchors for cross-border flows in remittances, stablecoin settlements, and trade finance. When those banks cannot hold or transact digital assets in a capital-efficient way, the institutional gateway they provide for emerging-market crypto activity remains largely closed.

Stablecoin remittance corridors along the India-Gulf-East Africa triangle rely increasingly on dollar-pegged stablecoins issued or co-managed by U.S. financial entities. Capital-efficient access to these instruments at the bank level would improve settlement liquidity and potentially lower costs along one of the world's busiest remittance routes.

Regulators in Nigeria, South Africa, and Kenya are each actively recalibrating their own crypto frameworks in 2026. Nigeria's central bank now permits banks to work with licensed virtual asset service providers. South Africa is integrating crypto into its exchange control regime; by December 2025, the country's Financial Sector Conduct Authority had approved roughly 300 crypto licenses at an approval rate of approximately 59%. These jurisdictions are watching U.S. and EU approaches closely. A U.S. shift toward risk-proportionate capital standards would add regulatory legitimacy to parallel moves in those markets, particularly given the compliance pressure those countries face from FATF requirements and the political weight that Basel norms carry for jurisdictions aligning themselves with international standards.

What Comes Next

The senators have not proposed specific alternative risk weights. They asked regulators to develop their own standards using a risk-based methodology consistent with the March 2026 interagency guidance on tokenized securities. The Federal Reserve's own capital modernization proposal, also from March 2026, aimed to eliminate overlapping requirements and calibrate charges to actual risk, giving the senators a foothold to argue the agency is already moving in this direction.

Whether the regulators act before or after the CLARITY Act reaches a Senate floor vote may shape how much of the legislative framework has practical effect on the ground.