Standard Chartered Bank enters crypto brokerage! SC Ventures avoids 1250% capital penalty

Standard Chartered is building a crypto brokerage business targeting hedge funds and asset management firms, under SC Ventures, to circumvent Basel’s 1250% risk weight. It has invested in Zodia Custody and Markets, becoming the first systemic bank to offer institutional spot trading in July. JPMorgan and Morgan Stanley are entering simultaneously, with US crypto ETFs managing $140 billion.

SC Ventures’ Regulatory Arbitrage and 1250% Capital Penalty

According to the Basel III agreement established in 2022, banks must apply a 1250% risk weight to “permissionless” crypto assets like Bitcoin and Ether held on their balance sheets. This is much higher than the 400% risk weight for some venture capital projects. Setting up this business outside the bank’s core divisions may be the only way for it to come to market.

What does a 1250% risk weight actually mean? It implies that for every $100 of Bitcoin held, a bank must hold $125 in capital as a buffer. This punitive capital requirement makes it nearly impossible for traditional banks to hold large amounts of crypto on their balance sheets. In contrast, the 400% risk weight for VC projects, while still high, is at least commercially feasible.

Standard Chartered’s strategy is to house its crypto brokerage within SC Ventures rather than its core corporate and investment banking divisions. As a venture capital arm, SC Ventures benefits from a more relaxed capital regulation framework. This architecture allows Standard Chartered to access the crypto market while avoiding large capital lockups, representing a clever regulatory arbitrage.

Three Pillars of Standard Chartered’s Crypto Strategy

Zodia Custody: Provides institutional-grade secure storage for crypto assets

Zodia Markets: Institutional trading platform, offering spot trading since July

Project37C: A developing prime broker offering financing, custody, tokenization, and market access

Last month, SC Ventures posted on LinkedIn about a joint venture called Project37C. Described as a “lightweight financing and market platform,” it will offer custody, tokenization, and digital market access services. The message did not mention any external companies or use the term “prime broker,” but its functions overlap with those of a prime broker.

Standard Chartered is no stranger to crypto. It previously invested in projects like Zodia Custody and Zodia Markets. Just six months ago, the bank claimed to be the first large, systemically important global bank to offer spot crypto trading to institutional clients. This “first mover” position has given Standard Chartered a competitive edge and brand recognition in the crypto space.

The $140 Billion Market Attracting Global Banks

Meanwhile, regulators worldwide are still debating how banks should handle crypto holdings. As of October, negotiations are ongoing. This uncertainty has not stopped US financial giants from entering the crypto space. Reports indicate JPMorgan is considering offering crypto trading services to institutional clients. Morgan Stanley has also filed to launch Bitcoin, Ethereum, and Solana ETFs. These will directly compete with firms like BlackRock and ARK, which have been active in the space for years.

The US spot crypto ETF market has now grown to about $140 billion, just two years after their initial approval. Increasing amounts of capital are flowing into this sector, with firms building supporting infrastructure. Prime brokers help institutional clients manage financing, custody, and trading on a single platform. As more hedge funds participate, this market segment is booming.

In April, Ripple invested $1.25 billion to acquire major broker Hidden Road. In October, FalconX announced the acquisition of one of the largest ETF issuers in crypto, 21Shares. These large acquisitions demonstrate rapid consolidation among prime brokers, with pioneers seeking to build scale and network effects. Standard Chartered’s entry now faces a highly competitive landscape.

The timing is no coincidence. Bitcoin traded above $92,000 at the start of 2026. It briefly fell to $90,000 but has only declined 2% over the past year. According to Brian Vieten of Siebert Financial, “Bitcoin has been consolidating around $90,000 after a long sell-off related to tax-loss harvesting, and there are concerns that MSCI might remove digital asset firms from major indices.”

MSCI has now abandoned its previous view, stating these government bonds are more like funds. This reduces one source of concern in an already uncertain field. For Standard Chartered, the gradual easing of regulatory uncertainty creates a more favorable environment for launching its crypto brokerage.

Malaysia’s Stablecoin Ambitions in Asia

Standard Chartered, Malayan Banking, and Capital A (the parent of Malaysia Airlines) have taken a significant step into Malaysia’s digital asset space, planning to explore a ringgit-pegged stablecoin. This project complements their crypto brokerage: the brokerage serves institutional clients’ trading needs, while the ringgit stablecoin targets retail and cross-border payments in Southeast Asia.

Malaysia, as Southeast Asia’s third-largest economy, could gain a competitive edge in payments if the stablecoin is successfully launched. Asia Airlines’ large customer base and cross-border payment needs provide natural use cases. Travelers could use the ringgit stablecoin to buy tickets, pay for baggage, and book hotels, bypassing traditional banks’ high fees and slow settlement times.

Standard Chartered’s dual-track approach demonstrates its comprehensive crypto strategy: providing brokerage services for institutions and promoting stablecoin use for retail. This vertical integration allows Standard Chartered to capture multiple profit points along the crypto value chain.