US regulators say banks don't need to hold extra capital against losses when dealing with blockchain-based securities, calling their rules “technology neutral”
U.S. banking regulators clarified on Thursday that banks should not have to hold additional capital against losses …
Context & Ripple Effects
The clarification extends a broader rollback of bank-specific crypto constraints. The OCC had already removed a prior expectation that banks obtain clearance for certain crypto activities, and the SEC’s repeal of SAB 121 removed an accounting treatment that had made token custody more balance-sheet intensive.
It matters because the latest position distinguishes the technology used to represent a security from the prudential treatment of the underlying exposure. That is a narrower but consequential step toward applying conventional bank rules to blockchain-based instruments.
First-order effects
- Banks dealing in blockchain-based securities can apply existing capital rules rather than add a technology-specific capital buffer for potential losses.
- The clarification reduces a regulatory uncertainty around bank participation in tokenized securities without changing the underlying risk standards for those securities.
Second-order effects
- Banks, custodians, and securities-market infrastructure providers have a clearer basis to evaluate blockchain settlement and custody offerings; providers built around bank clients may face less compliance friction.
- The stance reinforces the effect of the Federal Reserve’s withdrawal of prior crypto-activity approval guidance, making technology-specific supervisory hurdles less central to banks’ product decisions.
Third-order effects
- If regulators continue to treat tokenized instruments according to their economic exposure rather than their technical form, blockchain rails could become more integrated with established securities-market infrastructure.
- The boundary remains important: technology-neutral treatment of blockchain-based securities does not itself settle prudential treatment for other crypto activities or assets, preserving a segmented regulatory market.
The trend: US banking policy is moving from technology-specific restrictions toward risk-based treatment of selected blockchain uses within traditional financial markets.