A tokenised US Treasury bill and a spot bitcoin holding look similar on a balance sheet: both are digital assets recorded against a bank's capital. Under the rule written to govern them, they could hardly be treated more differently. One can carry the same capital charge as the underlying Treasury. The other, held directly, can require a bank to hold capital equal to the full value of the position, one dollar for every dollar of exposure. That gap is the deliberate design of the Basel Committee's prudential standard for banks' cryptoasset exposures, and it goes a long way to explaining which digital assets a bank will put on its balance sheet and which it will keep well away from it.
Four groups, and a cliff between them
The Basel Committee on Banking Supervision published the standard on 16 December 2022. It now sits in the consolidated Basel Framework as chapter SCO60. It sorts every cryptoasset exposure a bank might hold, whether a direct position, a derivative or a fund investment, into one of four groups, and the group decides the capital treatment almost entirely.
Group 1a: tokenised traditional assets
Group 1a covers tokenised versions of traditional assets: a bond, a deposit or a fund unit recorded on a ledger instead of, or alongside, a conventional register. To qualify, the arrangement must meet a set of classification conditions: the rights it confers must be clearly defined and legally enforceable; the network it runs on must be designed and operated so that its risks are adequately managed; and the entities that execute redemption, transfer, storage or settlement must be regulated and supervised, or subject to appropriate risk-management standards. Meet those conditions and the exposure is capitalised broadly as its non-tokenised equivalent would be. Fail them and the asset drops into Group 2.
That drop is what the industry calls a "cliff effect". In an August 2025 letter to the Committee, a coalition of banking and markets associations argued that assets on permissionless blockchains are excluded from Group 1 in practice, because the Committee regards them as unable to satisfy the conditions on network design and on regulation of the ledger. A tokenised US Treasury issued on a public blockchain, the associations wrote, would therefore "drop straight into Group 2b" and its 1,250% risk weight, even though its credit and market risk are those of a conventional Treasury.
Group 1b: stablecoins, and a bar raised in 2024
Group 1b covers stablecoins with an effective stabilisation mechanism. On 17 July 2024 the Committee published targeted amendments tightening the conditions. A stablecoin must now pass a redemption risk test, under which the reserve assets must at least equal the outstanding peg value and consist of short-term, high-quality, low-volatility assets in the currency of the peg, and a basis risk test, showing statistically that the coin trades close to its peg. Algorithmic stablecoins, and stablecoins that reference other cryptoassets, including other stablecoins, are not eligible.
Clearing Group 1b does not simply earn a low risk weight. The bank capitalises the exposure through the assets behind it and, where it has a credit exposure to the redeemer for coins not yet redeemed, through a claim on that redeemer; a structure that gives holders a direct, bankruptcy-remote claim on the reserves can remove the redeemer exposure. Group 1b stablecoins are also not eligible financial collateral under the standard, a point the same associations asked the Committee to revisit now that regulated issuers operate under regimes such as the EU's MiCA and the US GENIUS Act.
Group 2a: a short list, and a 100% weight
Group 2 is everything that fails the Group 1 conditions, split by whether hedging is recognised. To reach Group 2a, a cryptoasset must pass three hedging recognition tests: a derivative or exchange-traded product referencing it must trade on a regulated exchange or be centrally cleared; the asset must meet liquidity thresholds; and enough price data must exist over the previous year. In their August 2025 letter the associations counted only five cryptoassets that qualified: bitcoin, ether, XRP, solana and, recently, dogecoin. Group 2a exposures carry a 100% risk weight under modified market-risk rules, with limited recognition of hedging, and banks may not use internal models to calculate the charge.
Group 2b: the catch-all, at 1,250%
Everything else is Group 2b. The charge is a 1,250% risk weight applied to the greater of the absolute value of the bank's aggregate long and aggregate short positions in the cryptoasset, with no netting. At an 8% minimum capital ratio, that works out to capital equal to the full value of the position.
The limit on the whole Group 2 book
Group 2 carries a second constraint on top of the weights. A bank's aggregate exposure to Group 2 cryptoassets should generally stay below 1% of Tier 1 capital and must not exceed 2%. Exposure above 1% is treated as Group 2b, whatever group the asset would otherwise qualify for. Above 2%, every Group 2 exposure is treated as Group 2b, which removes hedging recognition for the whole book. The associations argue the limit is out of step with other exposure thresholds in the Basel framework, which are set far higher and measured net of hedges; the Committee has not changed it.
An add-on set at zero
Group 1 exposures carry one open-ended feature: an infrastructure risk add-on. The Committee did not fix a number. The add-on starts at zero, and national supervisors may raise it where they observe weaknesses in the technology underlying specific cryptoassets. The associations have asked for it to be removed, arguing that operational and third-party risk frameworks already cover the risk; the Committee has not removed it.
Implementation, jurisdiction by jurisdiction
The Committee originally asked members to implement the standard by 1 January 2025 and moved the date to 1 January 2026 with the July 2024 amendments. A Basel standard binds only through each jurisdiction's own law, and the record is uneven.
The European Union applies a transitional regime. Article 501d of the Capital Requirements Regulation, in force since 9 July 2024, treats tokenised traditional assets as the assets they represent, gives compliant asset-referenced tokens a 250% risk weight and other cryptoassets 1,250%, and provides that total exposure to those other cryptoassets "shall not exceed" 1% of Tier 1 capital, a firmer ceiling than Basel's "should generally" 1%. The European Banking Authority submitted final draft technical standards on calculating these exposures to the European Commission on 5 August 2025, aligned "to the best possible extent" with the Basel standard. The same article required the Commission to propose a dedicated permanent regime by 30 June 2025. Until that regime is adopted, the transitional rules are what apply.
The United Kingdom has not implemented the standard in its rules. The Prudential Regulation Authority's Dear CEO letter of 18 May 2026, which replaces its 2022 letter, keeps the expectation that firms apply a 100% capital requirement to unbacked cryptoassets under the market-risk framework: in effect the same full-value charge as Basel's Group 2b. Where PRA rules leave discretion, firms may use the Basel classification conditions as a reference point. For tokenised traditional assets, the PRA's view is that they would generally receive the same treatment as their non-tokenised equivalents where the legal rights are identical and the risks comparable, and it asks firms to look at risk "rather than the specific technology or type of ledger (eg permissioned vs permissionless)". The letter is expressly interim: the PRA will publish a proposed framework only after the Basel Committee's targeted review, and "expects to consult on a proposed framework in 2028 at the earliest."
The United States has adopted no capital rule implementing the standard. The federal banking agencies have rescinded the 2022 and 2023 supervisory letters that required banks to notify their supervisor, or obtain non-objection, before engaging in cryptoasset activity; the associations point out that this sits awkwardly with the Basel requirement that banks inform their supervisor of how they classify a cryptoasset before acquiring it. On 5 March 2026 the Federal Reserve, OCC and FDIC issued frequently asked questions stating that the capital rule is "technology neutral", so an eligible tokenised security receives the same capital treatment as its non-tokenised form, and that the rules do not distinguish between permissioned and permissionless blockchains. That is guidance on existing rules, not a new rule, and on the ledger question it departs from the Basel approach. The three capital proposals the agencies issued on 19 March 2026, with comments due by 18 June 2026, set no cryptoasset-specific risk weights. In a letter dated 27 May 2026, six Republican senators, co-led by Cynthia Lummis and Dan Sullivan, urged the agencies to adopt a "risk-based, technology-neutral capital framework" for banks' digital asset holdings, calling the 1,250% weight a "de facto ban". No rule has followed.
Canada implemented early but not exactly. OSFI published a final guideline based on the Basel standard on 20 February 2025, effective from 1 November 2025 or 1 January 2026 depending on an institution's fiscal year end. A revision on 29 October 2025 raised the Group 2 limit: total gross exposure should not exceed 5% of Net Tier 1 capital, and the 1% step into Group 2b treatment was removed. A 2027 version, announced on 10 September 2026 and effective from 1 November 2026 or 1 January 2027, excludes client-clearing exposures from that limit and recognises hedges of the same cryptoasset across regulated exchanges.
Hong Kong followed the Basel timetable. Amendment rules on capital, disclosure and exposure limits implementing the standard were gazetted on 11 July 2025 and took effect on 1 January 2026.
Singapore consulted on implementation from 1 January 2026, then, in its response of 9 October 2025, deferred the prudential treatment and disclosure of cryptoasset exposures to "1 January 2027 or later".
A pause refused, a review under way
On 19 August 2025 the associations, among them the Global Financial Markets Association, the Institute of International Finance and the International Swaps and Derivatives Association, asked the Committee to pause implementation and redesign the standard. They pointed to the growth of tokenised deposits, government securities and money market funds, and to jurisdictions declining to follow the standard's more conservative elements. The implementation date stayed at 1 January 2026. At its meeting of 18–19 November 2025, however, the Committee "agreed to expedite a review of targeted elements of the standard". On 20 May 2026 it "took note of the progress of the review" and said an update would be provided later in the year. The Committee has not said which elements are under review, and no outcome had been published at the time of writing. Until one is, a bank active across these jurisdictions can hold the same cryptoasset under materially different capital regimes depending on where the exposure is booked.
What this means for what a bank will hold
The standard's real effect is on the shape of the balance sheet, not on any single trade. A tokenised bond or fund unit that clears the Group 1a conditions costs little more to hold than the paper original, which is why tokenised traditional assets, rather than unbacked cryptoassets, are where banks are positioned to act at scale. The ledger question matters as much as the asset: the same Treasury can land in Group 1a or Group 2b depending on the network it is issued on, and the US and UK have now told their banks to look past that distinction where their own rules allow. A stablecoin that clears the tightened Group 1b tests is capitalised on its reserves and its redeemer, a real but bounded cost. Direct exposure to bitcoin, ether or any other unbacked cryptoasset is capped, under the Basel text, at low single-digit percentages of Tier 1 capital, and a bank that breaches the cap loses hedging recognition across the book.
That asymmetry, not a view on any coin, is why the custody arrangements a bank will back with its own balance sheet differ from those described in Proof of Talk's look at who actually holds institutional custody, and why investors seeking direct exposure have other routes, set out in how institutions allocate to digital assets. It is also why the line between a stablecoin, a tokenised deposit and a money market fund token matters to capital planning as much as to the legal analysis in stablecoins, tokenised deposits and money market funds.
This is not tax, legal, accounting or investment advice. A standard amended once already, under active review and adopted this unevenly is a reason to check the rules of the jurisdiction where an exposure is booked.