The Bank of Russia has put forward a proposal for a 1% crypto capital cap, aiming to limit covered crypto and foreign digital instrument risks to a bank’s own funds while excluding some client custody positions from the calculation. This proposal, presented on September 18, introduces N31 for individual credit institutions and N32 for banking groups on a consolidated basis. These ratios compare covered exposure with the institution’s capital rather than its total assets, with the rules still in draft form.
The proposed structure involves two levels, applying the same 1% ceiling to both a bank and its wider group. N31 utilizes the individual institution’s own funds, while N32 utilizes consolidated group capital, ensuring that the measurement is tied to the entity carrying the covered risk.
The draft regulation encompasses more than just outright coin holdings. It includes direct and indirect investments, derivatives linked to crypto prices, and various instruments like loans, bonds, guarantees, repos, and credit lines where the settlement or value depends on crypto or foreign digital instruments. Hedges receive limited recognition, with long and short positions only being netted within the lower-risk category specified in the draft.
When it comes to customer assets, the treatment depends on who bears the loss if assets are seized or transactions are restricted. A custody position is included in N31 or N32 when the bank or a digital depository in its group is liable for that loss. If the bank is not responsible for the loss, the client position is excluded from the 1% ratios.
Despite the exclusion, non-liable client custody positions are assigned a 50% risk weight for covered bank and group capital-adequacy calculations, while own-account exposure and client positions for which the bank is liable receive a 1,250% risk weight.
This distinction allows for custody without automatically categorizing every customer asset as the bank’s own exposure, as long as the institution does not bear the specified seizure or restriction liability. Simultaneously, it imposes a strict capital-based constraint on direct holdings and other crypto-linked risks carried by the bank.
These ratios are part of Russia’s broader crypto-market regulatory framework, which is still in the process of being finalized. The central bank intends to publish the official regulations in the fourth quarter of 2026, with the requirements becoming effective 10 days later. Banks are anticipated to start reporting instrument turnover and N31/N32 values in January 2027, although detailed forms are still under development.