Basel Crypto Standard Explained: Groups 1a, 1b, 2a and 2b
Quick answer. Basel's SCO60 puts cryptoassets meeting four conditions in Group 1: 1a for tokenized traditional assets, 1b for qualifying stablecoins. Everything else is Group 2: 2a if it passes hedging criteria, otherwise 2b at a 1250% risk weight.
Video transcript
Under Basel's cryptoasset standard, classification decides the capital. A qualifying tokenized bond is treated like the bond. One that fails can cost far more.
The standard sorts cryptoassets into four groups. Group 1a is tokenized traditional assets, 1b is qualifying stablecoins. The rest are Group 2, split by hedging criteria.
Group 2b carries a twelve hundred and fifty percent risk weight, meaning capital at least equal to the exposure.
Group 1 needs four conditions, met on an ongoing basis: qualifying asset type, legal certainty, managed network risk, and regulated entities.
Group 1b adds a redemption risk test. Reserves must cover the peg at all times, and redemption must complete within five calendar days.
The network test requires traceable transactions and participants. In December 2023, the Committee said permissionless chains create risks that cannot be sufficiently mitigated at present.
The bank owns the classification and must document it. Much of that file is security evidence: contract audits, mint controls, custodian diligence and upgrade alerts.
The framework lists it as effective from January 2026, but a targeted review is under way, with an update expected by year end.
Guardian's compliance assessments produce evidence a supervisor can trace: smart contract audits, a privileged role map, deployment verification and counterparty review.
Read the full article, or talk to Guardian about your classification evidence at guardian.security.
Banks now have a global standard for crypto capital. The Basel Framework lists its cryptoasset chapter, SCO60, as effective from January 1, 2026.
Classification decides the capital. A tokenized bond that qualifies is treated like the bond. One that fails can carry a 1250% risk weight.
The standard is also under review. On October 1, 2026, the Basel Committee said it expects to give an update by the end of the year.
This article explains the technical and security side of the Basel Committee's prudential standard for cryptoasset exposures (SCO60). It is not legal advice; confirm how it applies to you with counsel.
The Four Groups
SCO60 asks banks to screen each cryptoasset "on an ongoing basis" and place it in one of four groups (SCO60.6).
| Group | What it holds | Capital treatment |
|---|---|---|
| 1a | Tokenized traditional assets that meet the conditions | Same rules as the non-tokenized asset (SCO60.27) |
| 1b | Assets with effective stabilization mechanisms that meet the conditions | Capital for the reference asset, plus other risks (SCO60.31, 60.32) |
| 2a | Fail the conditions, pass the hedging recognition criteria | Modified market risk rules; some hedging recognized (SCO60.54) |
| 2b | All other cryptoassets | 1250% risk weight; no hedging recognized (SCO60.84) |
A 1250% risk weight means capital at least equal to the exposure (SCO60.86).
Group 2a is narrow. Among other tests, the asset needs an average market capitalization of at least USD 10 billion over the previous year (SCO60.55).
Group 2 also has a cap. Total Group 2 exposure "should not generally be higher than 1%" of Tier 1 capital and "must not exceed 2%" (SCO60.117).
Above 1%, the excess gets Group 2b treatment. Above 2%, all Group 2 exposures do (SCO60.118).
The Classification Conditions
Group 1 status needs all four conditions, met on an ongoing basis (SCO60.7).
- Type: a tokenized traditional asset, or a stabilization mechanism "effective at all times" (SCO60.8).
- Legal certainty: enforceable rights and settlement finality, backed by the bank's legal review (SCO60.14).
- Network risk: the asset and its network must sufficiently manage any material risks (SCO60.16).
- Regulated entities: whoever redeems, transfers, stores or settles it is regulated, or meets risk standards (SCO60.18).
Group 1a: the same rights
A tokenized bond, loan, deposit or equity must confer the same legal rights as its traditional form (SCO60.9).
It fails if holders must first redeem or convert it to get those rights. It also fails if its construction adds counterparty credit risk (SCO60.10).
Bank-issued tokenized payment assets backed by the bank's general assets can still qualify for 1a, even where locally called stablecoins (SCO60.9, footnote 2).
Group 1b: the redemption risk test
A stabilized asset must be redeemable for a predefined amount of its reference asset. Its issuer must face prudential capital and liquidity requirements (SCO60.11).
Reserves must "at all times, including during periods of extreme stress, equal or exceed the aggregate peg value" of tokens outstanding (SCO60.12).
The test also sets disclosure:
- Reserve value and tokens outstanding, at least every trading day.
- Reserve composition, at least weekly.
- Independent verification of those disclosures, at least twice a year.
- An external audit of the reserves, at least annually.
Redemption must complete within 5 calendar days of a request (SCO60.15).
Mechanisms that reference other cryptoassets, or that adjust supply by protocol, fail condition 1 (SCO60.13).
Permissionless Chains
SCO60 does not name permissionless chains in its conditions. Its tests reach the network itself:
- "All key elements of the network must be well-defined such that all transactions and participants are traceable" (SCO60.17).
- Those elements include the degree of access, node roles, and the validation and consensus mechanism.
- Node validators may meet "appropriate risk management standards" instead of being regulated (SCO60.19).
In December 2023, the Committee concluded that cryptoassets on permissionless blockchains "create risks that cannot be sufficiently mitigated at present". It kept the existing treatment.
The infrastructure risk add-on
Authorities must have the power to add capital for Group 1 exposures because of weaknesses in the underlying technology (SCO60.52).
The add-on starts at zero. Authorities raise it "based on any observed weakness in the infrastructure" (SCO60.53).
Evidence Banks Need
The bank owns the classification. It must "fully document" the information behind each decision and show supervisors on request (SCO60.20).
Before buying a new cryptoasset, it must send its supervisor the classification in time for an override. Supervisors may rely on independent third-party assessors (SCO60.20, 60.21).
Much of that file is security evidence. Our reading of what each condition calls for:
| Condition | What the text asks | Security evidence |
|---|---|---|
| 1 (Group 1b) | Monitoring that the peg works; verified reserve ownership | Mint and burn controls reviewed; supply and peg alerts |
| 2 | Settlement finality; redemption within 5 days | Finality rules per chain; a tested redemption path |
| 3 | Cyber, outsourcing and resilience risks managed | Audit of deployed contracts; validator and node map |
| 4 | Regulated or risk-managed operators and wallet providers | Due diligence on custodians and key providers |
| Ongoing | Screening on an ongoing basis | Alerts on upgrades, role changes and depegs |
SCO60 also lists technology risks to manage: network stability, validator design, lost or stolen keys, node operator trust and cyber attacks (SCO60.125).
Our advice for issuers that want bank holders to treat their token as 1b: have a privileged role map ready. Show who can mint, pause, freeze or upgrade, and how those keys are held.
For the stablecoin side, see our stablecoin risk assessment.
Review Status in 2026
The timeline, from the Committee's own releases:
- December 16, 2022: standard published, for implementation by January 1, 2025.
- December 7, 2023: permissionless treatment kept; the Committee agrees to consult on Group 1b revisions.
- July 17, 2024: amendments tighten Group 1b criteria; implementation set for January 1, 2026.
- November 19, 2025: the Committee agrees to "expedite a review of targeted elements".
- March 9, 2026: its oversight body, the GHOS, endorses the review.
- October 1, 2026: an update expected "by the end of the year".
No release has said which elements are under review. On November 6, 2026, the Basel Framework still showed the SCO60 version last updated November 27, 2024.
Basel standards are not law on their own. The Committee's charter says its decisions "do not have legal force", and members are expected to implement them.
For the wider supervisory picture, see digital asset security for banks.
How Guardian Helps
Guardian's regulatory and compliance assessments produce technical evidence a supervisor can trace back to the system.
Each artifact carries its scope, date and the provisions it answers. For a classification file, that can include:
- Smart contract audit reports with a fix review at a pinned commit.
- A privileged role and upgrade path map, read from the deployed contracts.
- Deployment verification: deployed bytecode matched to the audited commit.
- Counterparty review of the custodians, bridges and oracles you would depend on.
Guardian's institutional practice also advises on custody, signing and chain choices before they are built.
Frequently Asked Questions
What is the difference between Group 1a and Group 1b?
Group 1a is tokenized traditional assets, such as bonds or deposits, that give the same legal rights as the original. Group 1b is stabilized assets, such as qualifying stablecoins, that pass the redemption risk test and have a supervised issuer.
Can a stablecoin on a public blockchain be Group 1b?
It must meet all four conditions, including a network where all transactions and participants are traceable. In December 2023 the Committee said cryptoassets on permissionless blockchains create risks that cannot be sufficiently mitigated at present. Watch the 2026 review.
What is the Group 2 exposure limit?
Total Group 2 exposure should not generally exceed 1% of Tier 1 capital and must not exceed 2%. Above 1%, the excess is capitalized as Group 2b; above 2%, all Group 2 exposures are.
Is the Basel crypto standard in force?
The Committee set January 1, 2026 for implementation, and SCO60 is effective in the Basel Framework from that date. It binds banks once a jurisdiction adopts it. A targeted review is under way, with an update expected by year-end.
Sources
- BIS: Basel Framework, SCO60 Cryptoasset exposures, version effective January 1, 2026 (read November 6, 2026)
- Basel Committee on Banking Supervision: Prudential treatment of cryptoasset exposures (December 16, 2022)
- BIS: Basel Committee agrees to consult on targeted revisions to standards on cryptoasset and interest rate risk in the banking book (December 7, 2023)
- Basel Committee on Banking Supervision: Cryptoasset standard amendments (July 2024)
- BIS: Basel Committee publishes final disclosure framework for banks' cryptoasset exposures and targeted amendments to its cryptoasset standard (July 17, 2024)
- BIS: Basel Committee continues to prioritise Basel III implementation, approves final principles on third-party risks and agrees to expedite targeted review of cryptoasset standard (November 19, 2025)
- BIS: Basel Committee discusses recent market developments and targeted review of cryptoasset standard (February 25, 2026)
- BIS: Governors and Heads of Supervision welcome progress to implement Basel III and discuss elements of the Basel Committee's work programme (March 9, 2026)
- BIS: Basel Committee agrees to publish report on information and communication technology risk management, progresses cryptoasset targeted review, considers targeted updates on liquidity risk principles (May 20, 2026)
- BIS: Basel Committee meets to advance supervisory and regulatory initiatives and discuss risks and vulnerabilities to the global banking system (October 1, 2026)
- BIS: Basel Committee Charter, sections 3 and 12
- Guardian: Regulatory and Compliance Assessment
- Guardian: Institutional
Build the evidence behind your classification
Guardian audits, maps and verifies the contracts and controls a Group 1 classification file depends on, with every artifact tied to the provision it answers.