Trump Administration’s SLR Regulation Relaxation: A Catalyst for Bitcoin’s Bullish Trend

The Financial Times has reported that the Trump administration is poised to make a notable shift by relaxing the Supplementary Leverage Ratio (SLR) regulation, representing the most significant adjustment in capital requirements since the 2008 financial crisis. The SLR was originally designed to ensure that major banks maintained a robust capital base to mitigate leverage risks, an essential safeguard against potential systemic failures. Recent criticisms have highlighted its restrictive nature on the acquisition of low-risk assets like U.S. Treasuries.

Anticipated to be unveiled this summer, the new policy may exempt U.S. Treasuries and central bank deposits from SLR calculations, potentially unlocking up to $2 trillion in balance sheet capacity. This could incentivize banks to re-engage with the Treasury market and elevate overall liquidity. The initiative has garnered support from key financial leaders, including the U.S. Treasury Secretary and Federal Reserve Chair, as a pivotal banking reform.

While some analysts caution against easing capital constraints amid market fluctuations, many foresee that this regulatory shift could lead to a reduction in U.S. bond yields and facilitate an influx of capital into the Bitcoin and cryptocurrency sectors. Should this policy rollout proceed smoothly, it could bolster liquid resources, enhance bank engagement with U.S. Treasuries, and pave the way for increased investment in risk assets like Bitcoin, potentially solidifying its mid-term bullish trajectory.