The Fed is readying to punish banks for holding Bitcoin as US crypto tensions boil over

The next big Bitcoin policy fight may have nothing to do with ETFs or government legislation, but with a dry Federal Reserve capital proposal that most investors will never read. The landscape is simple: will big banks continue to treat Bitcoin as a balance sheet hazard, or will US capital rules begin to leave room for more serious bank intermediation around it? With the Fed expected to vote next week on a revised Basel proposal and then open a 90-day comment window, this little-noticed rulemaking could become one of the most important banking decisions for Bitcoin in years. Reuters reported on Mar. 12 that the Fed plans to vote next week on a revised Basel proposal for large banks and then open a 90-day public comment period. The Fed's Bitcoin-banking decision is moving on a short clock, with a vote expected next week followed by a 90-day public comment period. Fed Vice Chair for Supervision Michelle Bowman said the same day that proposals covering Basel III and the G-SIB surcharge would be published in the coming week. Most crypto investors do not care about prudential terminology, but they do care about whether their bank will eventually offer better Bitcoin services, whether crypto firms can more easily secure bank relationships, and whether Wall Street integration expands beyond ETFs. The current Basel framework is restrictive enough to make those questions materially harder for banks to answer. This all comes amid increasing tension between the US crypto industry and banks as they continue to clash over the stalled Clarity Act. The President chose a side this month by directly blaming banks for the delay. “The Banks are hitting record profits, and we are not going to allow them to undermine our powerful Crypto Agenda.” Donald Trump President (47th) • United States of America Share on View Profile What Basel says now Under the Basel crypto framework, banks' crypto exposures are split into Group 1 and Group 2, with the latter being the tougher bucket. A Group...