Basel's crypto-asset rules: how banks capitalize stablecoin exposure

When a bank holds a stablecoin, how much capital must it hold against it? The Basel Committee answered in December 2022 with SCO60, its prudential standard for crypto-asset exposures, and the answer runs from “the same as the underlying asset” to “one dollar of capital for every dollar of exposure”, depending entirely on how the asset is classified. For any institution weighing stablecoins or tokenized deposits as settlement assets, this classification is where the balance-sheet conversation starts.

The standard was due in national rulebooks by 1 January 2026. Where it actually stands, jurisdiction by jurisdiction, is messier, and the gaps matter as much as the rules.

The two-group design

SCO60 sorts every crypto-asset exposure into two groups.

Group 1 gets treatment broadly in line with the existing Basel framework. It has two halves. Group 1a covers tokenized traditional assets: a bond or deposit on a shared ledger that confers the same legal rights as its conventional form, confirmed by legal review, with settlement finality in both primary and secondary markets. It is risk-weighted like the non-tokenized asset it represents. Group 1b covers qualifying stablecoins, capitalized by reference to their reserve assets rather than as crypto-asset exposures.

Group 2 is everything that fails the tests: unbacked crypto-assets, algorithmic stablecoins, coins referencing other crypto-assets. Group 2a exposures, those with liquid, centrally cleared hedging instruments meeting market-capitalization and volume thresholds, are handled through the market risk framework. Group 2b, the residual, carries a 1,250% risk weight. At the 8% minimum ratio, that is capital equal to 100% of the exposure, applied to the greater of long or short positions without netting.

On top of the risk weights sits a hard ceiling: a bank must notify its supervisor when total Group 2 exposure passes 1% of Tier 1 capital, at which point the excess is charged at Group 2b rates, and if exposure passes 2%, the entire Group 2 book is capitalized at 1,250%. Group 1 assets carry an infrastructure risk add-on that supervisors may switch on if the underlying ledger technology shows weaknesses; the Committee set it at zero to start.

The stablecoin tests

Group 1b is where most institutional stablecoin questions land, and its gate is narrow. The redemption risk test requires that reserves equal or exceed the outstanding peg value at all times, sit primarily in short-term, high-credit-quality assets denominated in the peg currency, be capable of rapid liquidation with minimal price impact, and be bankruptcy-remote from the issuer, with semiannual independent verification and an annual external audit. The issuer itself must be supervised with capital and liquidity requirements. A basis risk test then asks whether the coin actually trades at its peg under stress.

Read that list against the regulatory regimes now in force and the convergence is obvious: the GENIUS Act’s 1:1 high-quality liquid asset reserves and MiCA’s e-money token requirements push issuers toward exactly the profile Basel rewards. A coin issued under those regimes has a plausible path to Group 1b treatment. A coin that fails them is, for a bank, a dollar-for-dollar capital charge.

Who has actually implemented

• Canada implemented on time: OSFI’s capital and liquidity guideline for crypto-asset exposures applies from banks’ fiscal 2026.
• The EU runs a transitional regime rather than full SCO60. CRR III, in force since July 2024, treats tokenized traditional assets and e-money tokens like their underlying exposures, charges asset-referenced tokens 250%, and charges everything else 1,250% with a 1% Tier 1 exposure limit (Article 501d), with EBA technical standards published in August 2025 and a permanent Basel-aligned regime to follow.
• The UK is implementing Basel 3.1 from 1 January 2027 under PS1/26. For crypto-assets specifically, the Bank of England has told firms to apply the existing framework to each asset’s actual risk profile in the meantime, and its draft rules for systemic stablecoins are expected during 2026.
• The US has proposed no SCO60 implementation. Its 2026 rulemaking energy has gone to GENIUS Act implementation and a March 2026 package modernizing the broader capital framework. US banks therefore face stablecoin questions under existing capital rules plus the GENIUS regime, with the Basel classification as reference rather than binding law.

For a global institution, the practical consequence is that the same stablecoin position can carry materially different capital treatment in London, Frankfurt, Toronto, and New York, and the safest common denominator is the strictest one.

What it means for institutions touching stablecoins

Three planning points fall out of the standard. First, asset selection is a capital decision: routing settlement through a regulated, fully reserved, same-currency coin is the difference between reserve-asset treatment and a punitive charge. Second, structure matters as much as asset: a tokenized deposit that is legally a deposit sits outside the punitive buckets entirely, one reason banks lean toward deposit tokens. Third, the 2% Tier 1 ceiling means no bank builds a large balance-sheet position in Group 2 assets; whatever institutional settlement adoption happens will happen in assets engineered to pass the Group 1 tests.

Where Frame fits

Frame is the settlement layer for global finance: one integration to orchestrate payments at scale across fiat rails, stablecoins, and tokenized deposits, with compliance enforced on every transaction and settlement in seconds instead of days.

Basel’s classification logic is a policy question, and policy is what Frame’s Rules Engine enforces inside settlement. An institution can express its prudential constraints as routing policy: settle only over assets meeting its Group 1 criteria, prefer tokenized deposits in one jurisdiction and regulated e-money tokens in another, and revert any transfer that cannot satisfy the policy that governs it. Because Frame is rail-neutral across fiat rails, stablecoins, and tokenized deposits, capital treatment becomes a routing input rather than a constraint on which rail an institution can use at all, and every settled transaction produces verifiable evidence that its conditions were met.

See how a rail-neutral settlement layer works: the Frame Blueprint.