Bank of Russia Caps Banks' Crypto Risk at 1%
The Bank of Russia has proposed draft rules to limit the total risk from cryptocurrencies and foreign digital instruments that banks can hold. The maximum allowed risk ratio would be 1% of a bank's capital, both for individual credit institutions (N31) and banking groups on a consolidated basis (N32). This rule applies not only to direct cryptocurrency holdings but also to loans, derivatives, bonds, repo transactions, guarantees, credit lines, and other financial instruments tied to cryptocurrencies or foreign digital instruments.
The Bank of Russia has separated crypto-related transactions into two groups based on sanctions and physical liquidity risks. Group 1 includes exchange traded cash settled derivatives, over-the-counter derivatives, and instruments with counterparties meeting specific credit standards. For qualifying assets in this group, banks can offset opposing long and short positions when calculating exposure.
Group 2 captures direct investments in cryptocurrencies and foreign digital instruments, loans settled exclusively with these assets, certain repo transactions, and derivatives that don't qualify for Group 1. The central bank would calculate Group 2 exposure using the larger of a bank's long or short position in each asset, preventing institutions from fully offsetting the two sides for risk limit purposes.
The proposed framework imposes a 1,250% risk weight on a bank's aggregate crypto exposure and certain client positions for which the institution assumes responsibility. Client assets protected by digital depositories would be included in the relevant risk calculation, while those not covered would receive a 50% risk weight for capital adequacy purposes.
The Bank of Russia plans to introduce reporting for turnover in covered instruments and the N31 and N32 ratios from January 2027, with detailed reporting forms still under development. The regulation is expected to be officially published in the fourth quarter of 2026 and would take effect 10 days after publication.