Group 2 Crypto Assets

Definition ∞ Group 2 crypto assets represent a regulatory classification for digital assets that do not qualify as stablecoins or highly liquid, low-risk cryptocurrencies like Bitcoin. This category generally includes a wide array of altcoins and tokens with higher volatility, less established market infrastructure, or complex underlying mechanisms. Banks holding Group 2 assets are subject to the most conservative prudential treatment, requiring a 1,250% risk weight. This high weighting is intended to mitigate potential financial instability.
Context ∞ The classification of crypto assets into Group 2 is a significant topic in financial news, particularly concerning banking regulations and institutional participation in the digital asset market. This designation effectively limits banks’ ability to hold such assets due to prohibitive capital requirements. The ongoing discussion among regulators and industry participants involves exploring more nuanced risk assessments to potentially revise these stringent capital rules in the future.