The Bank for International Settlements (BIS) has unveiled new regulations for banks seeking to hold XRP and other Group 2 cryptocurrencies. As a global bank for central banks, the BIS has previously defined Group 2 crypto assets to distinguish them from other digital currencies. Group 2 assets encompass unbacked cryptocurrencies like XRP, Bitcoin (BTC), and Ethereum (ETH), as well as stablecoins lacking effective stability mechanisms. These assets are deemed riskier due to their volatility. The BIS has now published its latest requirements for banks holding these assets. Notably, Eri, a prominent figure in the XRP community, highlighted the publication in a recent post on X.
According to the new regulations, a bank’s total exposure to all Group 2 assets must not exceed 1% of its Tier 1 capital. Tier 1 capital represents a bank’s core capital and serves as the primary financial buffer to absorb losses and maintain stability. For instance, if a bank with $1 trillion in Tier 1 capital wishes to hold XRP and other Group 2 assets, the combined value of these assets cannot exceed $10 billion.
Furthermore, the BIS stipulates that no single Group 2 cryptocurrency can make up more than 5% of the total Group 2 holdings. To illustrate, if a bank’s total Group 2 holdings amount to $10 billion, its XRP holdings alone cannot exceed $500 million. The same rule applies to other Group 1 assets. These limits aim to mitigate the risk associated with the fluctuating value of these crypto assets. Recent events, such as the Terra implosion in May 2022 and the FTX collapse in November 2022, have highlighted the risks associated with cryptocurrencies.
The BIS’ new requirements are scheduled to come into effect on January 1, 2026. These criteria could reshape the way financial institutions interact with assets like XRP, Bitcoin, and Ethereum.
As the crypto industry continues to enter the mainstream scene, regulatory focus on cryptocurrencies has intensified. For instance, the European Union recently implemented the first part of its MiCA regulations, which impact stablecoins. Mainstream banks have also started to gain exposure to crypto assets. In December, the Basel Committee disclosed the crypto holdings of 19 banks across different regions, revealing that they held $205 million in XRP at the time.
However, XRP has not experienced widespread adoption by banks and financial institutions due to the ongoing SEC lawsuit. Crypto researcher Anderson argued in February that XRP’s adoption by banks may not increase until the U.S. SEC publicly declares it is not a security.
Disclaimer: This article provides informational content and should not be considered financial advice. The opinions expressed in this article are those of the author and do not necessarily reflect the views of The Crypto Basic. Readers are advised to conduct thorough research before making any investment decisions. The Crypto Basic is not liable for any financial losses incurred.
