Wall Street is pushing US regulators to soften the Basel capital rules, arguing the current framework is too restrictive. According to a report from Crypto Briefing this week, the financial industry says easing those rules would free up bank liquidity and allow for more active engagement with crypto markets. But even if regulators budge, some of the most stringent trading requirements under Basel may still keep a lid on market fluidity.
What Wall Street wants
The push comes as banks face tight capital requirements that were designed to prevent a repeat of the 2008 financial crisis. Under the Basel III endgame rules adopted in the US, lenders must hold more capital against certain assets, including crypto-related exposures. Wall Street says that forces them to tie up funds that could otherwise be deployed in trading or lending. The ask is simple: pull back on those requirements so banks can move more freely.
Why liquidity matters
If regulators ease the rules, banks would have more room to lend and trade without immediately bumping into capital constraints. That could ripple through crypto markets, where institutional participation has often been hampered by banks' reluctance to touch digital assets. More liquidity from the banking side might mean tighter spreads and deeper order books on exchanges. But it's not a silver bullet.
The Basel hangover
Even a successful lobbying effort won't erase all the friction. The Basel framework includes strict trading book rules that don't go away just because the capital floor gets lowered. Banks still have to meet detailed risk-weighting standards for crypto exposures, and those rules are designed to limit how much leverage a bank can extend into volatile assets. So while easing capital rules might help at the margin, the structural constraints on crypto engagement remain.
What happens next
US regulators haven't signaled a timeline for any changes. The Federal Reserve, the OCC, and the FDIC all have a say, and none have publicly backed the industry's request. Wall Street will have to keep pressing. For now, the debate is over whether the capital rules are too blunt an instrument — and whether easing them would actually spark the crypto boom banks are betting on.
