(Reuters) -A group of finance industry bodies is calling for a rethink on looming regulatory standards that they say will make it difficult for banks to participate in crypto markets.

The Basel Committee on Banking Supervision, which comprises regulators and central banks from the world's main financial centres, agreed a set of standards in 2022 for how banks should manage and disclose risks around their exposure to crypto assets.

In an open letter to the committee, various finance industry groups said that the crypto market has changed since 2022, making the proposed standards too conservative.

While the crypto market remains a small part of the overall financial system, it has grown rapidly in recent years, with cryptocurrency prices reaching record highs. It has also become increasingly connected to mainstream financial markets.

Banks are trying to tap into a shift in the regulatory environment in the U.S., where President Donald Trump has taken a pro-crypto approach. U.S. regulators this year made it easier for banks to engage in crypto-related activities.

"The Cryptoasset Standard's restrictive qualification standards, combined with otherwise punitive market and credit risk capital treatments, effectively make it uneconomical for banks to meaningfully participate in the cryptoasset market," the letter said.

The letter called for the committee to "temporarily pause" implementation of the new standards, seek new information and consider making changes.

Signatories included the Global Financial Markets Association, the Institute of International Finance and the International Swaps and Derivatives Association - which lobby for the mainstream financial sector - as well as crypto industry groups.

The Basel Committee has no enforcement powers, but its members agree to apply its standards to international banks in their jurisdictions. The standards around crypto are due to come into effect in January 2026.

The Bank for International Settlements, where the Basel Committee is based, did not immediately respond to a request for comment.

A series of collapses at major crypto companies in 2022 left millions of investors out of pocket and revealed widespread misconduct in the industry, prompting calls for regulation.