Why Russia’s harsh 1% crypto cap actually protects bank customer assets

The Bank of Russia has drafted a regulation that would limit a bank’s crypto‑related risk to 1% of its own capital. The proposal, announced on September 18, creates two metrics – N31 for individual credit institutions and N32 for banking groups – each comparing covered crypto exposure with the relevant capital base.

Scope of the 1% cap

The numerator of the ratio includes not only direct cryptocurrency holdings but also indirect exposures such as derivatives tied to crypto prices, loans, bonds, guarantees, repos and credit lines whose settlement depends on crypto or foreign‑digital instruments. Hedging positions receive limited recognition, and netting is allowed only for lower‑risk categories that meet specific asset, settlement, maturity, freezing and liquidity criteria.

Treatment of client custody positions

Custody assets are included in the N31/N32 calculations only when the bank (or a digital depository in its group) is liable for loss if the assets are seized or transactions are restricted. If the bank is not liable, the client position is excluded from the 1% ratios but is still assigned a 50% risk weight for prudential purposes. Positions for which the bank is liable receive a 1,250% risk weight.

Implementation timeline

The central bank plans to publish the final rules in the fourth quarter of 2026, with the requirements taking effect ten days later. Banks are expected to start reporting instrument turnover and N31/N32 values in January 2027, though detailed reporting forms are still under development.