1,250% Risk Weight on Bitcoin… Is It Excessive Regulation?

▲ Bitcoin (BTC), Gold/AI-generated image ©

Criticism has emerged that the current Basel regulations assigning a 1,250% risk weight to Bitcoin effectively block banks from participating in the market.

On February 21 (local time), according to a cryptocurrency-focused outlet, Strategy CEO Phong Le urged a review of Basel III-style capital rules, arguing that they impose an excessive capital burden on banks’ Bitcoin (BTC) exposure. A chart shared on X shows that Bitcoin is classified as an “unsecured cryptoasset exposure” and assigned a typical risk weight of 1,250%, while cash, central bank reserves, physical gold, and U.S. Treasury bonds carry a 0% risk weight.

Le emphasized that the issue is not a political debate but a matter of structural design. The Basel framework represents global capital standards established by central banks and regulators across 28 jurisdictions and is subsequently reflected in national banking regulations. “If the United States aims to become the ‘world’s crypto capital,’ it must carefully examine how Basel capital rules are applied domestically,” he said.

The chart indicates that investment-grade corporate bonds carry risk weights of 20–75%, unrated corporate bonds 100%, high-yield bonds 150%, listed equities 250–300%, and private equity over 400%. Bitcoin, however, is separately categorized at 1,250%. Jeff Walton argued that “risk is mispriced” and called for regulatory changes.

Connor Brown, head of policy at the Bitcoin Policy Institute, explained that a 1,250% risk weight effectively requires banks to hold one dollar in capital for every one dollar of Bitcoin exposure. In contrast, gold is treated the same as cash, effectively resulting in no capital cost. He contended that such regulations discourage banks from offering custody and related services, pushing businesses and individuals toward non-bank entities or overseas jurisdictions.

Brown noted that despite Bitcoin’s operational strengths—including 24-hour trading, rapid auditability, fixed supply, swift global settlement, and transparent price discovery—it faces more punitive regulation than traditional assets. He warned that unless this structure is adjusted, the global competitiveness of U.S. financial institutions could be weakened. Meanwhile, Bitcoin is currently trading around $67,700.

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