Basel Rules Update Could Unlock Trillions in Liquidity for Bitcoin

The Basel III framework governs how much capital banks must hold against different asset classes. A lower risk rating for Bitcoin under the revised rules could trigger a surge in liquidity into the asset, according to market analyst Nic Puckrin.

Under current rules, Bitcoin and other digital assets carry a 1,250% risk weight. This means a bank must hold $1 in reserve for every $1 of Bitcoin it holds on its balance sheet, making it financially impractical to offer Bitcoin-related services.

Puckrin said that requirement makes it 'almost impossible' for banks to participate in the Bitcoin market in any meaningful way. The Basel Committee on Banking Supervision introduced these requirements for crypto assets in 2021, placing them in the highest risk category available under the framework.