Group Two Exposure

Definition ∞ Group Two Exposure pertains to the financial risk associated with holding or interacting with a specific classification of assets, often defined by regulatory bodies or internal risk management frameworks. Within the digital asset space, this categorization typically designates assets that carry higher volatility, lower liquidity, or increased operational complexities compared to more established digital currencies. It signifies a greater potential for capital loss or operational disruption. Institutions use this classification for internal risk assessment.
Context ∞ Discussions surrounding Group Two Exposure frequently appear in news related to institutional adoption of cryptocurrencies and evolving regulatory guidance. The situation often involves financial entities adjusting their capital requirements and risk provisions based on these classifications. A critical future development involves the refinement of global standards for digital asset categorization, which will shape how institutions manage and report their exposure to various crypto assets.