Strict capital reserve requirements imposed on banks are making it prohibitively expensive for them to hold cryptocurrencies, creating a “chokepoint” that throttles the sector’s growth, according to Chris Perkins, president of investment firm CoinFund.
The Basel Committee on Banking Supervision (BCBS), the global standard-setter for banking regulation, requires institutions to assign the riskiest weighting to crypto exposures. That effectively forces banks to hold a dollar in reserve for every dollar of cryptocurrency they carry on their balance sheets.
Perkins told Cointelegraph the rules slash banks’ return on equity (ROE), a key measure of profitability, and push them away from crypto.
“It’s a different type of chokepoint, in that it’s not direct,” Perkins said. “It’s a nuanced way of suppressing activity by making it so expensive for the bank to do activities that they’re just like, ‘I can’t.’ If I have capital to invest, I’m going to put it into high-ROE businesses, not low-ROE businesses.”
BIS doubles down on restrictions
The Bank for International Settlements (BIS), which serves as a hub for central banks and hosts BCBS meetings, has consistently voiced skepticism about digital assets.
In April, the BIS warned that cryptocurrencies could destabilize the global financial system and worsen wealth inequality, calling for tighter oversight. In June, it followed with a report titled “Stablecoin Growth: Policy Challenges and Approaches”, which argued stablecoins “fail as money” and pose systemic risks as their links with traditional finance expand.
“Stablecoins’ rising market capitalization and increasing interconnections with the traditional financial system have reached a stage where potential spillovers can no longer be ruled out,” the report said.
Instead, the BIS has urged central banks to accelerate development of central bank digital currencies (CBDCs), which it frames as a safer, more controlled alternative to privately issued crypto.
Clash with DeFi principles
Perkins, however, has argued the real systemic risk comes from the mismatch between decentralized, always-on networks and legacy banking infrastructure that still shuts down on nights and weekends.
Earlier this year, he criticized BIS proposals to apply traditional banking regulations such as KYC rules to decentralized finance (DeFi) and stablecoins, saying they undercut the principle of open, permissionless networks.
“The asymmetry is glaring,” Perkins said.
“Liquidity can move in real time on decentralized rails, while the traditional system refuses to adapt.”
The standoff highlights the widening divide between regulators intent on containing crypto and investors who see the rules as deliberately stifling its integration with global finance.
