A group of Senate Republicans has urged US financial regulators to clarify the capital standards for companies engaged in crypto activities.
Senator Cynthia Lummis said on Thursday that she led the group in sending a letter on May 27 to Federal Reserve Vice Chair for Supervision Miki Bowman, Federal Deposit Insurance Corp. Chairman Travis Hill, and Comptroller of the Currency Jonathan Gould.
The letter commended the agencies’ guidance in March that clarified the 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 the value of their digital asset holdings, which the Senators said was essentially a “de facto ban” on banks holding crypto.
The letter comes as senators are preparing to act on a bill, dubbed the CLARITY Act, that would outline how federal agencies will regulate crypto. The current version of the bill allows banks to use digital assets and blockchain for activities such as payments, lending, custody and trading.
Senate leaders are pushing to pass the bill ahead of the midterms in November, as the legislation risks having to be reintroduced in the next session of Congress if it fails to pass ahead of the elections.
Source: Cynthia Lummis
The group took issue with the Basel Committee on Bank Supervision’s longstanding standards that assigned 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.”
“Any proposed capital treatment of on-balance sheet digital asset activities should accurately reflect the opportunities and risks of digital assets — and be based on, to the extent possible, a technology-neutral approach that gives banks the authority to participate meaningfully in digital asset markets,” the group said.
Related: Debate on CLARITY Act continues this week as US Senate returns
They added that crypto legislation under consideration in the Senate would “undoubtedly require capital guidance” and urged regulators to begin work on a new capital framework for crypto.
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. The legislation lays out how the Securities and Exchange Commission and the Commodity Futures Trading Commission will regulate crypto markets and companies.
The Senate Banking and Agriculture Committees have passed their own versions of the bill addressing securities and commodities, but the full Senate will need to reconcile the different bills.
Other issues raised by lawmakers, including stablecoins, ethics and crypto developers, will also need to be addressed in the bill if it is to receive the 60 votes needed to pass the Senate without lengthy debate that could leave the bill stalled indefinitely.
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