Basel’s 1,250% Rule Could Keep Crypto Out of Banks

The Basel Committee on Banking Supervision’s cryptoasset chapter, SCO60, took effect on Jan. 1, 2026, and applies a 1,250% risk weight to unbacked crypto in its Group 2b category. Under Basel’s 8% minimum capital ratio, that risk weight translates into a capital charge roughly equal to 100% of the exposure, so a $100 million Bitcoin holding requires about $100 million of bank capital.

SCO60 sorts crypto exposures into tiers. Group 1a covers tokenized versions of traditional assets. Group 1b covers stablecoins that meet strict reserve and redemption tests. Assets that fail those conditions are in Group 2, split into 2a for tokens judged liquid and hedgeable and 2b for tokens judged neither liquid nor hedgeable. The 1,250% weight applies to Group 2b. The standard also sets an exposure cap: a bank’s total Group 2 holdings should remain under 1% of Tier 1 capital; crossing 2% removes hedging recognition and triggers the 2b treatment for all Group 2 positions.

Industry trade bodies raised concerns about parts of SCO60. Groups including ISDA and the GFMA told the Committee in August 2025 that elements of the standard were overly conservative and asked for recalibration. The Committee opened an expedited review of targeted parts of SCO60 in November 2025 and reported progress in February and May 2026, with further updates expected later in 2026.

National authorities have taken different approaches to implementing SCO60. The U.S. government rejected the fixed 1,250% weight in Executive Order 14178 and in a July 2025 digital-asset report, advocating for a risk-based approach linked to market behavior. European regulators incorporated Basel’s treatment into the CRR3 capital rules and are drafting technical standards to implement it at the EU level. Because Basel rules become binding only through national adoption, the same tokenized asset can carry different capital charges in different jurisdictions.

Banks and other financial firms are already building services tied to tokenized assets and stablecoins. Examples include JPMorgan’s JPMD deposit token, Citi’s Token Services, and tokenized deposit projects at HSBC. Tokenized real-world assets on public chains have surpassed $16 billion, with tokenized government securities the largest share. The stablecoin market is about $320 billion and is mostly dollar-denominated.

The capital treatment affects balance-sheet calculations. Many bank activities around digital assets are fee-based and require limited balance-sheet capacity, including custody, fund administration, stablecoin reserve management, tokenized-deposit settlement, collateral services and market making in regulated products. A high capital charge on inventory, financing or reserve holdings increases the amount of equity a bank must set aside for those positions.

Basel’s framework does not prescribe law in any single country; national regulators adopt and adapt the framework when setting capital requirements. The Basel Committee’s review is addressing narrow technical points of SCO60. Until national authorities change capital rules or the Committee finalizes revisions, banks that engage in digital-asset services must comply with existing capital treatments and exposure limits.