Tensions between regulation and innovation took center stage at TheCityUK’s annual London conference
UK regulators must rethink upcoming rules for banks’ crypto holdings or risk digital assets becoming increasingly vulnerable to illicit activity, a top banking executive has warned.
Speaking today at TheCityUK’s annual conference in London, Citigroup UK chief Tiina Lee raised concerns about the global Basel Committee standards, which classify crypto as one of the riskiest asset classes and impose huge capital charges on banks that hold it.
The framework, set to take effect next year, imposes a 1,250% risk weight on crypto assets held by banks. For institutions with a 10% capital ratio, that means holding £125 in capital for every £100 in crypto exposure.
Lee described the approach as “prohibitive” for regulated institutions, per Bloomberg reporting.
“So as we think about how fast this market is moving, is that something that actually, as an industry, we want in the non-regulated sphere, or is it better that it’s supervised appropriately, with the right oversight?” she said.
Her remarks come amid a wider debate about how best to integrate digital assets into mainstream finance without compromising oversight or stifling innovation.
Crypto capital requirements raise oversight concerns
The Basel framework classifies crypto assets as the highest-risk exposures, requiring banks to hold disproportionately high capital against them. Many in the financial sector see this approach as a deterrent to participation.
Critics warn that such strict requirements could drive digital asset activity into less transparent, lightly regulated parts of the financial system.
As institutional demand and blockchain adoption continue to grow, calls are mounting for more flexible, forward-looking regulatory frameworks.
Industry groups argue that rigid capital thresholds risk stifling innovation without meaningfully reducing systemic risk.
Lee’s remarks reflect a broader concern: shutting crypto out of regulated finance may ultimately do more harm than good by limiting oversight and pushing activity underground.
