Bitcoin’s Stress Test: How the Fed Could Regulate Crypto Without Endorsing It

Bitcoin’s rise is forcing regulators to confront a paradox: Can the Federal Reserve model crypto risks without endorsing them?

Pierre Rochard called for Bitcoin (BTC) inclusion in Federal Reserve stress tests, citing growing bank exposures through custody, derivatives, and ETF intermediation.

The Fed’s 2026 stress tests currently exclude Bitcoin but model 28 variables, including equity indices, interest rates, and real estate prices.

BlackRock’s IBIT (Bitcoin ETF) reported $70.24 billion in net assets as of January 2025, with ETF authorized participants linked to U.S. global systemically important banks (G-SIBs).

The Fed proposed adding Bitcoin to stress tests only if exposures meet four criteria: materiality, repeatability, balance-sheet mapping, and data auditability.

Three implementation tiers for Bitcoin inclusion are plausible: (1) trading-book shock in global market scenarios, (2) supervisory variable for banks with material crypto exposure, (3) exploratory scenario analysis. Bank trade groups argue against premature inclusion, emphasizing scenario design as a capital-allocation tool with real consequences for bank behavior.

Look, the Fed’s approach hinges on mapping crypto risks to existing capital buffer frameworks. If Bitcoin’s volatility meets the stress test criteria, its inclusion could reshape CET1 ratios for banks with significant crypto holdings. But the three-tier framework suggests regulators are hedging their bets—testing crypto’s systemic impact without fully integrating it into traditional risk models.

⚠️ LEGAL DISCLAIMER: This article is for informational purposes only and does not constitute financial or investment advice.