Executive Summary

• The US is the most significant jurisdiction driving the growth of the cryptoassets market, marked by an unwavering push to provide regulatory clarity and initiatives among federal regulators that augur an expanding legitimization of cryptoasset activities.

• Legal and regulatory considerations for banks amid increased regulatory clarity include assessing capital requirements and legal certainty on the acquisition and disposal of cryptoassets.

• The GENIUS Act, which provides a regulatory framework for stablecoins, and the Clarity Act which provides a comprehensive regulatory framework for cryptoassets generally, both contain provisions that limit the potential application of the Basel Committee’s cryptoasset infrastructure risk capital requirements in the US, putting US banks in a more favorable position compared to banks in jurisdictions that ultimately strictly adopt the Basel Committee’s standards.

• Fannie Mae and Freddie Mac mortgage qualification standards are to include cryptoassets as qualifying assets against which a borrower’s affordability is assessed.

• Banks that move quickly to implement practical steps to take advantage of these changes, such as upgrading risk management infrastructure, trading, clearing and settlement systems, and custody arrangements, could create near term opportunities to upscale lending and trading activities and reap substantial first mover rewards.

Summer 2025 Legislative and Regulatory Developments

In July 2025, ‘Crypto Week’ ushered in House floor votes on the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) bill (S. 1582) on stablecoins, as well as the Digital Asset Market Clarity Act (the “Clarity Act”) bill (H.R. 3633) on crypto market structure. The GENIUS Act was passed by the Senate on June 17, 2025 and the House on July 17, 2025, and signed into law by President Trump on July 18, 2025. The Clarity Act was passed by the House on July 17, 2025, but there has been no action on  it in the Senate, which is drafting its own versions of the bill. The Clarity Act, among other things, divides jurisdiction of the cryptoassets market between the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission. Crypto Week was the near culmination of a crypto renaissance in the US that began with the January 2025 ‘Strengthening American Leadership in Digital Financial Technology’ executive order by a then newly sworn in President Trump which articulated a policy to provide regulatory clarity and certainty to support the responsible growth of cryptoassets, blockchain technology and related technologies in the US. Since then regulatory pronouncements at the federal level, including from the SEC, have provided an unprecedented level of clarity on a range of issues including crypto mining, crypto staking, liquid staking and tokenized securities. The SEC has also embarked on an initiative that it calls ‘Project Crypto’, an initiative to modernize US securities rules and regulations in furtherance of President Trump’s efforts to make America the crypto capital of the world.

In June 2025, the Director of the US Federal Housing Finance Agency and chairman of the boards of Fannie Mae and Freddie Mac, William Pulte, issued an order (the “FHFA Cryptocurrency Order”) requesting that Fannie Mae and Freddie Mac prepare their systems to recognize certain cryptoassets as an eligible assets in connection with mortgage qualification assessments. This move opens the door to cryptoassets being considered as legitimate assets for purposes of establishing mortgage affordability in the same way a person’s cash in bank accounts and traditional securities in brokerage accounts are considered.  

US Banks Moving to Increase Adoption

Evidence that the banking sector is paying attention to the changes at the federal level and exploring opportunities in cryptoassets can be seen in reports from May 2025 that Morgan Stanley is planning to provide access to the over five million customers of its brokerage platform, E-Trade, to directly invest in cryptocurrencies and reports from June and July 2025 that JPMorgan is exploring offering its clients loans collateralized by Bitcoin exchange traded funds (“ETFs”) and taking certain clients’ crypto holdings into account in assessing net worth, as well as lending directly against cryptoassets such as Bitcoin and Ether.  When America’s largest bank and the federal agency overseeing the provision of over US$8 trillion in funding for the US mortgage market are seeking to recognize certain cryptoassets as legitimate collateral for conventional loans, it signifies a certain maturity in the understanding of the capacity for cryptoassets to create risk-adjusted value, bridging the decentralized underpinnings of cryptoassets with traditional finance. 

This paper discusses capital requirements and legal certainty considerations that banks should take into account in anticipation of increasing regulatory permissibility for cryptoassets-related activities, including in connection with lending against cryptoassets for a variety of purposes. The paper also highlights some other practical and organizational considerations. Considerations depend on the type of cryptoassets, e.g. stablecoins vs. unbacked cryptoassets like Bitcoin, and how they are presented, e.g. whether they are held in native format or packaged in the form of a traditional security, like ETFs. 

New Basel Capital Requirements for Cryptoassets

Key restraints in the ability of banks to hold and lend against cryptoassets are the capital charges assessed against assets, known as Risk Weighted Assets or “RWA” (not to be confused with the term ‘Real World Assets’ used in the crypto market).  These capital charges are drawn up and agreed by the Basel Committee on Banking Supervision which each jurisdiction then adopts into local law. The Basel Committee has finalized its standards on the treatment of banks’ exposure to cryptoassets (the Basel Cryptoasset Standards”) and set a target date for implementation by member jurisdictions of January 1, 2026. The Basel Cryptoasset Standards classify cryptoassets into two main groups, Group 1 cryptoassets and Group 2 cryptoassets, and then applies minimum capital requirements against a bank’s exposure to those assets.

• Group 1 is comprised of tokenized traditional assets (i.e. dematerialized securities that are already classified and accounted for under other existing Basel Cryptoasset Standards and that are issued using distributed ledger technology or similar technology) (Group 1a) and certain stablecoins that are backed by high quality assets at all times representing at least 100% of the value of the outstanding stablecoins, that are redeemable within 5 calendar days of a redemption request, and that are issued by supervised and regulated issuers (Group 1b).  The Basel prescribed capital requirements for these assets are based on the risk weights of the underlying assets, e.g. for eligible stablecoins, this would include short-dated government debt. The Basel Cryptoasset Standards make it clear that algorithmic stablecoins are not eligible for Group 1 categorization. 

• Group 2 is comprised of higher risk assets that don’t satisfy the criteria for Group 1 and is further subdivided into cryptoassets for which the ability to hedge will be taken into consideration in determining the amount of the exposure and for which netting will be allowed (Group 2a), and those for which hedging will not be taken into consideration (Group 2b). Cases where hedging will be considered will include situations where there are derivatives or exchange traded funds/notes that reference a specific cryptoasset and are traded on a regulated exchange or, for derivatives, cleared through a qualifying central counterparty and the relevant market is highly liquid with data on price, trading volumes and market capitalization sufficiently available. A 1250% risk weight will be applied to Group 2b. The capital requirement for Group 2 cryptoassets is equal to 100% of the cryptoasset exposure. Total bank exposure to Group 2 cryptoassets must not exceed 2% of a bank’s Tier 1 capital. 

The standards include an add-on to the capital requirement for exposures to Group 1 cryptoassets to cover infrastructure risks that regulators will activate (i.e. increase from zero) based on any observed weaknesses in the infrastructure on which the cryptoassets are based.  Any application of this element of the Basel Cryptoasset Standards in the US will be restricted by requirements of the GENIUS Act and similar provisions in the Clarity Act bill that prohibit regulators from requiring the holding of regulatory capital against cryptoassets held in custody or safekeeping by regulated entities above and beyond what is necessary to mitigate operational risks inherent in custody or safekeeping services. 

Furthermore, while noting that the Basel Committee’s decisions do not have legal force and that its standards are determined by consensus of the committee’s members, which include the US, the President’s Working Group on Digital Asset Market’s July 30, 2025 Report (the “PWG Report”) highlighted the importance of the US presence in leading international forums. The PWG Report therefore recommended that the US adopt capital requirements for bank digital asset activities that accurately reflect the risk of the asset or activity and advocate that the Basel Committee revisit its cryptoasset standards to ensure similar treatment to US capital requirements.

The Uniform Commercial Code - Recognition of Cryptoassets

Cryptoassets take a form different from assets recognized and traded in traditional finance prior the advent of Bitcoin in 2008 (Bitcoin as a concept appeared in October 2008, but the first transaction in the cryptoasset took place in January 2009). Given the novel nature of cryptoassets, a framework is needed to provide legal certainty around the acquisition and disposition of interests in cryptoassets. A key aspect of this framework is in the form of a new Article 12 of the Uniform Commercial Code, a comprehensive body of law long relied on by contracting parties which provides certainty to banks and other parties to commercial transactions in the US. New Article 12 provides rules governing the transfer of interests (including security interests) in cryptoassets (called controllable electronic records) which provides clarity to transacting parties. Article 12 provides certainty that a good faith purchaser of a cryptoasset covered by the article, who purchases the asset for value and without notice of another claim on the asset, will be able to take the asset free and clear of any third-party claims to the asset. The Article has been finalized and is awaiting adoption by all 50 states in the US. As of August 20, 2025, 32 states have enacted Article 12, and it is in legislative processes in an additional 6 states, including New York State. 

Practical Considerations and Expected Timelines

The table below looks at a number of cryptoasset initiatives and highlights some of the practical considerations banks should take into account in connection with relevant activities. A bank’s decision to hold cryptoassets on a proprietary basis or provide cryptoasset services to clients must be consistent with its risk appetite as well as its board approved strategic objectives. Furthermore, engagement with regulators is necessary along with conducting risk assessments which take into consideration a bank’s (a) core financial risks given its strategic direction and business model; (b) ability to understand a complex, evolving, and potentially unfamiliar asset class; (c) ability to ensure a strong control environment; and (d) contingency plans to address unanticipated challenges in effectively providing services.

¹ On July 22, 2025, the US Senate published an initial discussion draft of the Senate Banking Committee’s version of cryptoasset market structure legislation. Any resulting bill passed by the Senate will have to be reconciled with the House’s Clarity Act bill before it goes to President Trump for signing into law.

² The Senate Banking Committee has published a draft bill of its version of the Clarity Act, the Responsible Financial Innovation Act of 2025. A version is also expected from the Senate Agriculture Committee. Any bills resulting from these Senate processes will need to be reconciled with the Clarity Act.

³ Atkins, Paul S., American Leadership in the Digital Finance Revolution (July 31, 2025).

⁴ Pulte, William J., In re: Order Issuing Directive to Consider Cryptocurrency as an Asset in Risk Assessments (Fannie Mae and Freddie Mac), US Federal Housing FHFA, (Decision No. 2025-360, June 25, 2025). See also Okoli, Ijeoma and Norfolk-Thompson, Toby,  US Mortgage Origination Guidelines Changing to Recognize Cryptoassets, Sentora (July 2, 2025).

⁵ Levitt, Hanna, Morgan Stanley to Offer Crypto Trading to E*Trade Customers, Bloomberg (May 1, 2025); McGrath, Catherine, Banking Giant Morgan Stanley Reportedly Plans to Introduce Crypto Trading on E*Trade, Fortune (May 1, 2025).

⁶ Nicolle, Emily and Levitt, Hannah, JPMorgan Plans to Offer Clients Financing Against Crypto ETFs, Bloomberg (June 4, 2025).

⁷ Franklin, Joshua, JPMorgan Explores Lending Against Clients’ Crypto Holdings, Financial Times (July 22, 2025).

⁸ It is worthwhile noting that references to “exposure” in the Basel Cryptoasset Standards include any on or off-balance sheet amounts that give rise to credit, market, operational and/or liquidity risks.  The operational risk requirements along with the risk management and supervisory review sections are applicable to a bank’s custody services which involve “the safekeeping or administration of client cryptoassets on a segregated basis, that do not generally give rise to credit market or liquidity requirements” (see SCO60.4 of the Basel Cryptoasset Standards).

⁹ See SCO60.121 of the Basel Cryptoasset Standards.

¹⁰ These risk assessment strands, although derived from the Federal Reserve, OCC and FDIC’s July 14, 2025 statement on Crypto-Asset Safekeeping by Banking Organizations, are reasonable strands for banks to consider generally in connection with other anticipated cryptoasset activities.

¹¹ See conditions related to custody  listed in Commissioner Hester Peirce’s May 8, 2025 speech, A Creative and Cooperative Balancing Act.

¹² For more information on the GENIUS Act and stablecoin opportunities for banks, please see Okoli, Ijeoma and Norfolk-Thompson, Toby, The GENIUS Act and Opportunities for US Banks, Sentora (June 18, 2025).

¹³ SEC Chair, Paul Atkins, in his June 9, 2025 speech to the SEC’s Crypto Task Force Roundtable on Decentralized Finance indicated that he has directed the SEC’s staff to consider a conditional exemptive relief framework or “innovation exemption” that would permit market participants to bring on-chain products and services to market which would facilitate a pro-innovation ecosystem in furtherance of making America the crypto capital of the world. See also SEC Commissioner Hester Peirce’s May 8, 2025 speech, A Creative and Cooperative Balancing Act, where she indicated that the SEC was considering conditional exemptive relief to allow firms to issue, trade and settle securities using blockchain.

¹⁴ See examples of variations in classification types for different types of tokenized securities structures articulated by SEC Crypto Task Force Lead, Commissioner Hester Peirce, in her July 9, 2025 statement, Enchanted, but not Magical: A Statement on the Tokenization of Securities.

¹⁵ See conditions listed in Commissioner Hester Peirce’s May 8, 2025 speech, A Creative and Cooperative Balancing Act.

¹⁶ Id.

¹⁷ Supra note 15.