Traditional banks hold the legal permission to custody Bitcoin, issue stablecoins, and settle tokenized funds. Prohibitive capital requirements are severely constraining those operations. Under the Basel Committee’s cryptoasset standard (SCO60), which went live globally on January 1, 2026, unbacked cryptocurrency is placed in the most punitive risk classification.
The framework assigns a 1,250% risk weight to these assets. Because of minimum capital rules, banks must set aside one dollar of equity for every dollar of Bitcoin exposure on their books. The regulations also impose a strict exposure limit, requiring a bank’s total Group 2 crypto holdings to stay under 1% of its Tier 1 capital.
What We Know
- Punitive Weighting: Unbacked crypto carries a 1,250% risk weight under the new global standards.
- Capital Caps: Total Group 2 crypto exposure cannot exceed 1% of Tier 1 capital.
- Threshold Penalties: If holdings cross a 2% threshold, every position is dragged into the highly restrictive 2b bucket.
The strict capital math overrides previous regulatory allowances. The OCC previously issued guidelines that formally confirmed US banks can hold digital assets for network fees and operational testing. Now, the Basel constraints make utilizing that operational flexibility prohibitively expensive for regulated entities.
Institutions are altering their approach to digital assets. Banks are actively moving familiar products onto blockchain rails, focusing on turning tokenization into a distribution strategy rather than holding unbacked crypto directly.
How the SCO60 Framework Restricts JPMorgan and Citi Tokenization
The Basel Committee finalized this cautious capital math during a different era of the digital asset industry. Regulators designed the 1,250% risk weight to quarantine the banking system from the opacity of early unbacked stablecoins and the market contagion caused by the high-profile failures of FTX and Celsius. The rules prioritized systemic isolation over operational integration.
Today, those same rigid rules penalize fundamentally different banking activities. Major financial institutions pushing into blockchain, including JPMorgan with its JPMD deposit token, Citi Token Services, and HSBC, face direct impacts. As these banks attempt to integrate tokenized deposits and tokenized Treasury bonds onto regulated balance sheets, their fee-based custody services can fail the technical conditions for lower-risk classification. When that happens, those institutional products drop straight into the speculative Group 2b category, triggering the extreme capital requirements.