The U.S. banking regulators recently announced significant easing of capital requirements for the nation's largest banks. This major regulatory change is expected to free up between $175 billion and $200 billion in excess capital and could reshape the interaction between banks and digital assets.
Federal Reserve Vice Chair for Supervision Michelle Bowman proposed a reworking of the Basel III final framework from March 12 to 13, 2026, aimed at replacing the 2023 version, which faced strong opposition from the banking sector. The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are coordinating this reform, adopting a “capital-neutral” stance to replace the previous dual framework with a single one.
The March 2026 re-proposal covers four pillars: stress testing, supplementary leverage ratio, Basel III risk-based capital framework, and additional fees for globally systemically important banks. Industry groups, including the American Bankers Association, the Financial Services Forum, and the Bank Policy Institute, have praised the proposal, stating it addresses the concerns raised by 97% of commenters on the previous version.
How Capital Relief Will Reshape Banks' Cryptocurrency Business
This capital reform comes at a crucial time for institutional adoption of cryptocurrency. Under the current international Basel Committee standards, banks face a 1250% risk weight on unsecured crypto assets, effectively requiring that every dollar of crypto exposure be matched by a dollar of capital. This punitive treatment has limited banks' willingness to offer custody, lending, and trading services for digital assets.
The regulatory reset is not limited to capital ratios. The SEC Staff Accounting Bulletin 121 (SAB 121), which was rescinded in early 2025, eliminated the requirement for banks to hold 1:1 capital reserves against customer crypto holdings. Combined with recent OCC guidelines allowing national banks to engage in crypto activities, this capital relief could accelerate project advancements for institutions like BNY Mellon and State Street, which have established crypto custody infrastructure but face balance sheet constraints.
Wall Street Cheers, While Critics Warn of Echoes from the 2008 Crisis
Bowman views this proposal framework as evidence-based rather than outcome-driven. She stated, “We are not starting from a total ‘goal’ and then working backward; we are assessing the pros and cons of each requirement.” She added that these changes “will maintain resilience and provide flexibility in credit for American families and businesses.”
Not everyone shares this optimistic view. Massachusetts Senator Elizabeth Warren called it “a weak rule that fails to address serious flaws in the capital framework that have never been fixed since the 2008 financial crisis.” This criticism highlights broader political divides over whether post-crisis safeguards have been dismantled too aggressively.
The proposal is now entering a public comment period, typically lasting 90 days, after which the Federal Reserve will vote on the final rule. The eSLR rule, effective from January 1, 2026, allows for early adoption starting in November 2025.