US, UK, and European regulators have cleared banks to issue stablecoins and custody Bitcoin. The capital rulebook says otherwise.
Banks across the US, the UK, and Europe now have a legal path to issue stablecoins, custody Bitcoin, and settle tokenized funds. Yet the capital rulebook still treats a Bitcoin position as something close to a guaranteed loss.
The barrier is the Basel Committee’s cryptoasset standard, known as SCO60, which went live on January 1, 2026 in member jurisdictions. The standard assigns unbacked cryptocurrency a 1,250% risk weight, requiring banks to hold capital equal to their full crypto exposure. Under Basel rules, banks must maintain a minimum of 8% capital against their assets. A $100 million Bitcoin position would therefore demand $12.5 million in capital reserves, creating an economic barrier to offering crypto services even where regulators permit it.
The Basel Committee sorts crypto into tiers based on backing and liquidity. Group 1a covers tokenized traditional assets. Group 1b includes stablecoins meeting strict tests. Group 2a captures liquid assets. Group 2b covers illiquid holdings, which face punitive treatment if they exceed 2% of a bank’s Tier 1 capital. A tokenized Treasury bond on a public blockchain, for example, can fail Group 1 conditions and drop into Group 2b, triggering the higher capital charge.
The divergence between permission and capital cost has not escaped industry notice. “That gap between permission and capital cost is the part of crypto regulation almost nobody’s paying attention to, even though it’s the thing that’s going to decide how much digital-asset business actually ends up inside regulated banks,” according to analysis of the framework.
JPMorgan, Citi, and HSBC have each moved into tokenized services, from deposit tokens to fund administration and collateral management. These institutions are designing fee-based, light-balance-sheet models to avoid holding crypto on their books. But the capital math remains a constraint on scale.
The Trump administration rejected SCO60 via Executive Order 14178, calling the 1,250% weight anti-innovation and anti-competitive. The US GENIUS framework keeps tokenized deposits under ordinary deposit treatment, while payment stablecoins face a dedicated regime. Europe, by contrast, folded Basel treatment into its CRR3 capital rules and ongoing technical standards, maintaining a cautious stance aligned with the Committee’s approach.
The result is jurisdictional fragmentation. The same tokenized asset carries different capital charges in Frankfurt versus New York. A bank operating across borders must navigate multiple capital regimes simultaneously.
The Basel Committee opened an expedited review of SCO60 in November 2025 and noted progress in February and May 2026. The Committee has promised an update later this year. Industry bodies including ISDA and GFMA submitted pushback to the Committee in August 2025, arguing the standard overstates risk and dampens innovation.
Tokenized assets on public chains currently total $16 billion, while stablecoins have reached a $320 billion market size, almost entirely dollar-denominated. Both segments depend on institutional participation. Banks holding crypto on balance sheet would accelerate both figures, but only if the capital cost falls into line with the regulatory permission already granted.
