CryptoSlate
The Bank of Russia has proposed a 1% capital ceiling on covered crypto and foreign-digital-instrument exposure, measured through two new ratios. N31 would apply to individual credit institutions, while N32 would apply to banking groups on a consolidated basis. Both compare covered risk with the institution’s own funds or group capital, not total assets.
The draft also draws a sharp line between a bank’s own exposure and customer custody. Client assets enter N31 or N32 when the bank or a digital depository in its group is liable for losses caused by seizure or transaction restrictions. If the bank does not carry that liability, the custody position stays outside the two 1% ratios.
Why it matters
The cap reaches beyond coins held directly. The numerator includes direct and indirect investments, crypto-linked derivatives, and loans, bonds, guarantees, repos and credit lines whose settlement or value depends on crypto or foreign digital instruments. Limited hedge recognition is available, but long and short positions can be netted only within a qualifying lower-risk category and under conditions involving the asset, settlement, maturity, freezing and liquidity risk.
The treatment preserves room for custody without automatically counting every customer asset as the bank’s own crypto exposure. It also makes the allocation of loss responsibility central to the capital calculation. Own-account exposure and client positions for which the bank is liable receive a 1,250% risk weight, while non-liable client custody positions receive a 50% risk weight in broader capital-adequacy calculations.
Market impact
The proposal would constrain direct and other higher-risk crypto-linked activity on bank balance sheets while leaving a defined route for custody services. The two-level structure means both the individual bank and its wider group face the proposed ceiling, reducing the scope for shifting covered risk within a banking group.
The rules remain in draft form. The Bank of Russia plans official publication in the fourth quarter of 2026, with the requirements taking effect 10 days later.
Frequently asked questions
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What are Russia’s proposed N31 and N32 ratios?
N31 would measure covered crypto and foreign-digital-instrument exposure for individual credit institutions. N32 would apply the same proposed 1% ceiling to banking groups on a consolidated basis.
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Which crypto-related exposures would count toward the 1% cap?
The draft includes direct and indirect investments, crypto-linked derivatives, and loans, bonds, guarantees, repos and credit lines whose value or settlement depends on crypto or foreign digital instruments.
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When does customer crypto custody enter the bank’s capital ratios?
Customer custody enters N31 or N32 when the bank or a digital depository in its group is liable for losses caused by seizure or transaction restrictions.
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How are non-liable customer custody assets treated?
They remain outside the N31 and N32 ratios, but the draft assigns them a 50% risk weight in covered bank and group capital-adequacy calculations.
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When could Russia’s proposed rules take effect?
The Bank of Russia plans official publication in Q4 2026. The requirements would take effect 10 days after publication, with N31 and N32 reporting expected from January 2027.
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