Basel 1

Basel’s bank regulators have discovered a neat trick: if you don’t like an asset class, you don’t have to ban it—you can just make it economically impossible for banks to hold. Under the Basel Committee’s current proposal for crypto exposures, unbacked cryptoassets such as bitcoin fall into the harshest bucket, attracting a 1,250% risk weight. In capital terms, that is effectively a 100% deduction: for every dollar of bitcoin exposure, a bank must hold roughly a dollar of capital against it.

That treatment is now being challenged—by the industry that has spent the last decade insisting it doesn’t need banks. According to Bitcoin.com News, Strategy (the company formerly known as MicroStrategy) CEO Michael Saylor is calling for a rethink of Basel’s 1,250% capital treatment for bitcoin, arguing the framework over-penalizes the asset relative to other risks.

The dispute is not really about bitcoin’s volatility—markets can price that just fine. It is about who gets to price it for the banking system. Risk weights are regulatory price controls: they steer balance sheets by decree, regardless of whether the underlying model matches reality. If the risk weight is punitive enough, banks will not warehouse the asset, will not intermediate it, and will not build the plumbing (custody, financing, derivatives) at scale. The rule determines whether crypto becomes a bankable asset or remains an offshore, broker-driven ecosystem.

Basel’s logic is: unbacked crypto has no claim on cash flows, can gap violently, and can fail operationally (custody, hacks, settlement finality). The committee’s answer is to force banks to treat it as if it were maximally risky—worse than most equities, worse than many structured products, and closer to a prohibited holding.

Saylor’s counter-argument—again, per Bitcoin.com News—amounts to a plea for proportionality and for a framework that distinguishes between different cryptoassets and risk management practices. But the more interesting point is what the lobbying reveals: crypto’s path into the financial mainstream is being pursued less through market adoption than through standards politics.

If Basel relents, the winners are not retail hodlers. They are the institutions that can monetize compliance: large banks, custodians, and exchanges with balance-sheet access. If Basel holds the line, crypto remains what it has largely been: a parallel financial system that thrives precisely because it is not permissioned.

Either way, the episode shows that “risk” in modern finance is not merely discovered—it is assigned. And once assigned by the right committee, it becomes destiny for capital allocation.