As tensions over cryptocurrency in the United States continue to escalate, the Federal Reserve is preparing to penalize banks that hold Bitcoin. The next major Bitcoin policy battle might not involve ETFs or government legislation, but rather a dry and tedious capital proposal from the Federal Reserve that most investors probably won't even read. The situation is straightforward: will large banks continue to view Bitcoin as a balance sheet risk, or will US capital rules begin to allow banks to engage more actively in Bitcoin trading?

The Federal Reserve is expected to vote next week on a revised Basel Accord proposal and open a 90-day public comment period. This little-known rulemaking could become one of the most significant banking decisions affecting Bitcoin in recent years.

On March 12, Reuters reported that the Federal Reserve plans to vote next week on a revised Basel Accord proposal targeting large banks and open a 90-day public comment period. Michelle Bowman, the Federal Reserve's Vice Chair for Supervision, said that day that the proposal covering Basel III and Global Systemically Important Banks (G-SIB) surcharges would be released next week.

Most cryptocurrency investors don't care about the terminology of prudential regulation, but they do care whether banks can ultimately provide better Bitcoin services, whether cryptocurrency companies can more easily establish partnerships with banks, and whether Wall Street integration will extend beyond ETFs.

The current Basel Accord framework is highly restrictive, making it difficult for banks to answer these questions.

Meanwhile, tensions between the US cryptocurrency industry and banks have escalated, with both sides continuing to clash over the stalled Clarity Act. This month, the President made his position clear, directly blaming banks for delaying the passage of the legislation.