Russia Proposes 1% Cap on Banks' Crypto Exposure

The Bank of Russia has proposed a rule to cap banks' exposure to crypto assets and foreign digital instruments at 1% of their own funds, introducing new prudential ratios for both standalone credit institutions and banking groups. The draft creates two ratios: N31 for individual credit institutions and N32 for banking groups on a consolidated basis.

The proposal includes direct and indirect investments, derivatives linked to crypto prices, and instruments such as loans and bonds whose value depends on crypto assets or foreign digital instruments. Long and short positions would be netted only within a qualifying lower-risk category, suggesting the central bank is less focused on enabling broad risk offsetting and more focused on containing crypto-linked exposure.

The customer assets receive different treatment depending on whether the bank is liable for losses. Custody positions enter the N31 or N32 calculation when the bank bears that liability, while client custody positions for which the bank is not liable would receive a 50% risk weight, and liable positions would face a 1,250% risk weight.