Senate Republicans push finance watchdogs to clarify crypto capital rules

Senator Cynthia Lummis led a group of Senate Republicans in urging US financial regulators to clarify the capital standards for companies engaged in crypto activities.

The group sent a letter on May 27 to Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Chairman Travis Hill, and Comptroller of the Currency Jonathan Gould. The letter commended the agencies' guidance in March that clarified capital treatment of tokenized securities, but urged them "to build on that progress to move towards a clear and fair capital treatment for on-balance sheet treatment of digital assets."

Current international standards for capitalizing crypto holdings require banks to hold a greater value of reserve assets compared to their digital asset holdings, which the Senators said was a "de facto ban" on banks holding crypto.

The letter comes as senators are preparing to act on the CLARITY Act, which would outline how federal agencies will regulate crypto. Senate leaders are pushing to pass the bill ahead of the midterms in November.

The group took issue with the Basel Committee's standards assigning a 1,250% risk weight to crypto, which they said was "not derived from a calibrated assessment of the actual risk profile of digital assets."

Senators Dan Sullivan, Bill Hagerty, Bernie Moreno, Ted Budd and Jon Husted also signed the letter. Debate on the Senate's crypto bill is slated to resume this week after the Senate returned from recess.