The Bitcoin Policy Institute (BPI) intends to challenge Bitcoin’s status under international banking regulations as the US Federal Reserve issues new guidance on how banks should handle asset risk weighting. The BPI contends that international regulations place undue stress on financial institutions that handle or hold BTC.
On March 13, 2026, BPI managing director Conner Brown stated that the group will review the upcoming proposal from the Federal Reserve and will make comments to ensure that BTC is treated properly. In a post on X, Brown said that the institute wants the US regulators to properly evaluate the classification of BTC in the banking system.
Bitcoin Faces Harsh Basel Banking Rules
The move is in line with a Federal Reserve plan to issue a proposal outlining how U.S. banks should apply Basel Committee risk-weighting rules. The rules evaluate asset risk on a bank’s balance sheet and determine how much capital is needed to fund those assets.
According to Brown, Basel rules classify BTC very harshly, assigning it a risk weight of 1,250%. This is very high when compared to other traditional assets. Brown says that this is very strict, almost treating BTC as if it were a toxic asset in banking.
Meanwhile, Michelle Bowman stated that the Fed plans to introduce regulations in the coming weeks to implement the last Basel phase in the US. The goal is to have an efficient regulation system while making banks strong to support growth.
The current system dictates that a 1,250% risk weight means banks must back all their Bitcoins with approved capital. In essence, for every dollar of Bitcoins that banks have on their balance sheets, they must have an equivalent amount of capital. This means that Bitcoins are extremely costly for banks to hold.
In contrast, cash, government bonds, and physical gold have a 0% risk weight, which means that no additional capital is required by the bank.
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BPI Criticizes Basel Bitcoin Classification
Brown has previously expressed disapproval of this method in a blog post. He described BTC’s classification by Basel as the “most punitive” classification and said that the rule misunderstands the way that the asset works and is being evaluated in the financial system.
The debate on the classification of BTC started in 2021 when the Basel Committee on Banking Supervision proposed that cryptocurrencies be included in the high-risk group 2. This means that the value of the cryptocurrencies held by a bank will not be more than 1% of the value of the assets held in group 1.
According to Brown, these restrictions prevent banks from serving BTC users and crypto businesses. The Fed is currently crafting a proposal on the matter. The Bitcoin Policy Institute hopes that the comments it submits will help create a framework that allows banks to work with BTC with fewer regulatory barriers.
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