Pierre Rochard, chief executive of The Bitcoin Bond Company and a prominent Bitcoin (BTC) advocate, has formally warned United States banking regulators about a major gap in their proposed Basel III capital rules.
Rochard, on Sunday, submitted a comment letter to the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve Board (FRB).
He argued that the agencies should not finalize the broad reforms without clearly stating how Bitcoin-related activities will be treated under the new framework.
After the 2008 global financial crisis, many banks collapsed due to inadequate capital. For its solution, they created Basel III. The rules’ main purpose is to make banks stronger in order to prevent further crises in the global financial system.
Following the post-financial crisis reform drive, the FDIC, OCC, and FRB announced on 19 March that they had proposed changes to the ways in which large banks in the US compute capital against various risks.
The regulators said that the banking system is in a much better position compared to the 2008 financial crisis.
They noted the primary goal is to make the system simpler, stronger, and better matched to real risks. The changes cover major areas such as credit, market, and operational risk.
U.S. regulators said the proposal would wrap up the final Basel III capital changes for the country’s biggest banks. Even so, the document said nothing about Bitcoin, crypto, or digital assets. It is still only a proposal for now and will stay open for public feedback until 18 June.
Rochard said that this leaves banks without a clear direction on how to manage Bitcoin holdings, lending, custody, and derivatives.
He warned that this uncertainty could lead to legal issues and make it harder for the market to determine the actual cost of providing Bitcoin-related services.
Basel’s existing crypto standard is still hanging over the issue
The main issue centers on SCO60, a global Basel framework released in December 2022 that sets how banks should treat crypto assets on their balance sheets. It places a 1,250 percent risk weight on unbacked crypto assets like Bitcoin.
In banking terms, that means firms must hold a very large amount of capital against any Bitcoin exposure. Rochard said this makes Bitcoin services costly and difficult for traditional banks to offer.
Pierre Rochard stated that American financial authorities still failed to make it clear whether they would fully apply this stringent standard, apply only parts of it, or use domestic financial regulations that already exist. He stated that without such clarity, banks would not be able to evaluate the real cost of holding Bitcoins or making loans collateralized by them, which could deter them from the sector altogether.
Tokenized securities received guidance, but Bitcoin did not
Rochard also highlighted the agencies’ recent guidance on tokenized securities. On 5 March, the three regulators said eligible tokenized securities should generally receive the same capital treatment as their traditional versions.
Rochard said regulators have not offered similar clarity for Bitcoin, even as they push ahead with a broader capital overhaul.
“The fiat system should stop sabotaging itself. Bitcoin banking rules would improve bank net interest margins and lower interest rates for borrowers,” he stated in his comment on X.