Rahul Advani is global co-head of policy and Matthew Osborne is head of policy for UK and Europe, both for cross-border fintech Ripple
As crypto assets and distributed ledger technology continue their steady march into mainstream financial markets, global banks stand at an inflection point.
The regulatory frameworks that govern banks’ exposure to these innovations must evolve, or risk pushing activities outside the regulated perimeter. A soon-to-be-published joint letter from leading financial associations to the Basel Committee on Banking Supervision is a clear call for recalibration, balancing financial stability with responsible innovation.
Risk is nothing new for banks. With centuries of experience managing credit, market and operational exposure, they are uniquely positioned to bring discipline and oversight to the digital asset space.
Prudential regulation should focus on mitigating risks, regardless of the underlying technology. However, the proposed BCBS Cryptoasset Standard imposes punitive capital requirements on many types of crypto exposures, discouraging bank participation in a realm increasingly dominated by nonbank entities.
Financial markets are already innovating within this space, as evidenced by the boom in tokenised government bonds, stablecoins and regulated crypto asset ETFs. According to a recent report from Boston Consulting Group and Ripple, tokenised assets could reach $18.9tn by 2033.
DLT offers measurable efficiency gains — faster settlement, reduced counterparty risk, and programmable liquidity management — and institutional demand is growing.
Products like BlackRock’s BUIDL and Franklin Templeton’s BENJI are examples of tokenised money market funds gaining traction. These are not speculative assets but regulated instruments serving clear investor needs. Banks play a key role in integrating DLT with traditional financial markets, and their involvement will accelerate adoption and ensure innovation has the broadest possible reach.
“Excluding regulated banks from meaningful involvement in digital asset markets risks pushing activity to less-supervised actors”
Yet the current regulatory framework threatens to stifle progress before these innovations can mature.
If banks are disincentivised from engaging in digital asset markets, the broader market structure may evolve in ways that leave regulators with less visibility and fewer levers of control. Excluding regulated banks from meaningful involvement in digital asset markets risks pushing activity to less-supervised actors, undermining transparency and accountability.
The most problematic aspect of the current BCBS standard is the 1,250 per cent risk weighting applied to many crypto asset exposures, effectively treating them as toxic assets. This blanket treatment contradicts the principle of proportionality and technology neutrality, as well as limiting banks’ ability to offer services where they can add real value through existing compliance and governance frameworks.
The treatment of crypto assets hosted on permissionless blockchains is especially concerning. Permissionless networks vary in governance, transparency and security, with some designed for enterprise use. A blanket approach ignores these nuances and the growing acceptance of permissionless blockchains for regulated financial use cases.
The restrictive criteria for stablecoins is similarly flawed and creates arbitrary cliff edges. A fully backed fiat stablecoin, regulated for value stability, would still face the 1,250 per cent risk weight, solely because it is issued on a public blockchain. This ignores real-world prudential improvements and institutional governance, creating a de facto parallel regulatory standard for stablecoins which goes beyond the purpose of the BCBS Standard and overlooks evolving stablecoin models and regulatory advances.
A more risk-sensitive approach is needed, one which enables a more nuanced environment for innovation, and promotes a globally consistent regulatory baseline. A technology-neutral approach, aligned with the principle of “same activity, same risk, same regulation”, is essential to ensure a balanced, resilient financial ecosystem.
Perhaps most urgent is the risk of regulatory fragmentation. The EU, UK, Singapore and Hong Kong are all implementing the BCBS Cryptoasset Standard differently — some more permissive, others more restrictive. This creates competitive imbalances and opens the door to regulatory arbitrage, precisely the outcome Basel seeks to avoid.
A harmonised approach would allow banks to operate on a level playing field, streamline cross-border compliance, and strengthen market integrity. A new round of consultation and a revised implementation timeline would be both timely and pragmatic, creating space to align cross-border approaches, reassess capital and exposure treatments, and future-proof prudential rules.
A moment of choice
Regulators are right to be cautious, but they must also be agile. The current framework, while intended to safeguard financial stability, risks becoming a barrier to innovation and inadvertently increasing systemic vulnerabilities.
We encourage the BCBS to reopen the Cryptoasset Standard and conduct a thorough review with meaningful industry input. A risk-sensitive, principles-based approach would empower banks and crypto natives alike to responsibly shape the future of finance.
It’s time to update the rulebook, not to lower standards, but to ensure they are fit for purpose in a digitally transformed financial system. The path to safer, more inclusive markets lies not in sidelining banks, but in equipping them to lead — with the right tools, the right rules, and the right regulatory mindset.
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