Basel Crypto Rules for Banks 2026: Group 1b Stablecoins Explained

A risk officer at a mid-sized bank in Frankfurt is asked two questions in the same week. Can the bank hold a dollar stablecoin on its balance sheet to settle client trades? And could it issue a token of its own? Both answers start in the same place: a chapter of the Basel Framework called SCO60, which decides how much capital a bank must hold against any cryptoasset. Get the classification right and a stablecoin can be close to cash. Get it wrong and the bank may need to hold capital equal to the entire position.

Capital rules sound dry, but they are the hidden price tag on everything banks do. If holding a token costs a bank a dollar of equity for every dollar of exposure, it will not hold the token, and it will not build products around it. That is why the Basel Committee on Banking Supervision's crypto standard, and its decision in November 2025 to fast-track a review of parts of it, matter far beyond the world of bank supervisors.

What the Basel Committee decided, and when

The Basel Committee, whose 45 members from 28 jurisdictions set the global minimum standards for bank regulation, published its prudential treatment of cryptoasset exposures on 16 December 2022. The final standard covers tokenised traditional assets, stablecoins and unbacked cryptoassets, and was slotted into the consolidated Basel Framework as a new chapter, SCO60. Members originally agreed to implement it by 1 January 2025. In its announcement, the Committee signalled that unbacked cryptoassets and stablecoins with ineffective stabilisation mechanisms would get a "conservative prudential treatment".

On 17 July 2024 the Committee tightened the criteria for stablecoins to receive the preferential Group 1b treatment, added a disclosure framework with standard tables and templates, and pushed implementation to 1 January 2026, according to the BIS press release. The Basel Framework now lists SCO60 and the matching disclosure chapter, DIS55, as in force from that date.

Then the market moved faster than the rulebook. At its 18-19 November 2025 meeting in Mexico City, the Committee said that in light of recent developments in cryptoasset markets it would expedite a review of targeted elements of the standard, per its meeting statement. It did not say which elements, or when the review would finish.

The four groups

Everything in SCO60 flows from a single classification step. Each cryptoasset a bank touches lands in one of four buckets, set out in the framework text.

The design choice is clear. Group 1 is meant for things that are traditional finance in a new wrapper. Group 2 is a holding pen for assets supervisors consider too volatile or opaque to model, and it is deliberately expensive.

The Group 1b tests in detail

For stablecoins, Group 1b is the prize. To get there, the token must satisfy four conditions plus issuer-specific requirements.

• Condition 1, a real peg. The stabilisation mechanism must link the token's value to reference assets at all times. Pegs that reference other cryptoassets, or that adjust supply through a protocol, do not qualify. Algorithmic stablecoins are out by design.
• Condition 2, enforceable rights. Holders' rights must be clearly defined and legally enforceable with settlement finality, and full redemption must be possible within 5 calendar days of a request.
• Condition 3, a sound network. The token and its underlying network must be designed and run to manage material risks, with key network elements well defined and traceable.
• Condition 4, regulated operators. Entities handling redemption, transfers, storage or reserve management must be regulated and supervised or subject to appropriate risk standards.

On top of this sits the redemption risk test. Reserves, net of other claims, must at all times, including under extreme stress, at least equal the total peg value outstanding. For a currency-pegged coin, reserves should be mostly short-term, high-quality assets in the same currency as the peg. The issuer must disclose the amount in circulation every trading day, reserve composition at least weekly, obtain independent verification at least every six months and a full external audit each year. Finally, the issuer itself must be supervised and subject to prudential capital and liquidity requirements. Banks must also run a basis risk test showing the token tracks its reference asset, and supervisors can override a bank's own classification.

Basel does not ask whether a stablecoin is popular. It asks whether it would survive a run.

Worked example: why classification is the whole game

Take a bank with a USD 10 million position in a dollar stablecoin. Under Basel, minimum total capital is 8% of risk-weighted assets, so the risk weight assigned to the position determines how much equity it ties up.

1. Fallback treatment. SCO60 says that where a bank cannot look through pooled reference assets, it must apply a 1,250% risk weight. USD 10 million x 1,250% = USD 125 million of risk-weighted assets. At 8%, that requires USD 10 million of capital: one dollar of capital per dollar of exposure.
2. A lighter comparison. If the same claim were weighted at 100%, a weight used here purely for comparison, risk-weighted assets would be USD 10 million and required capital USD 800,000.
3. The difference. Moving from the punitive bucket to a normal one cuts the capital charge by a factor of 12.5, from USD 10 million to USD 800,000.

For a bank earning a few basis points on settlement activity, the first outcome makes the business impossible and the second makes it ordinary. That is why issuers, banks and industry groups have spent three years arguing over the wording of the Group 1b conditions.

What this means for banks issuing stablecoins

The rules cut both ways for banks that want to issue, rather than hold, a dollar or euro token.

On one side, banks are natural Group 1b issuers. They are already supervised with capital and liquidity requirements, which is exactly what the issuer test demands. A bank-issued coin backed by short-dated government debt and redeemable within days is the model case the standard was written for.

On the other side, a bank has an alternative that is cleaner still: the tokenised deposit. A tokenised deposit is simply a bank deposit recorded on a ledger, so it sits in Group 1a and carries the same treatment as the deposit itself. It does not need a separate reserve pool, and it stays inside deposit insurance and resolution rules. Our explainers on tokenised deposits and on stablecoins versus CBDCs versus tokenised deposits set out the trade-offs.

Meanwhile, the largest stablecoins are issued by non-banks under new national regimes. The US GENIUS Act cleared Congress in July 2025 after a 308-122 House vote, as The Block reported, and in October 2026 the European Banking Authority classified USDC as the first significant e-money token under MiCA, out of 45 notified, with direct EBA supervision of its reserves and liquidity from 12 November 2026. As of October 2026, USDC supply is about USD 73 billion and USDT about USD 184 billion, according to The Block. Whether a bank can treat exposures to those coins as Group 1b depends on how supervisors judge them against the Basel tests, which is exactly the kind of question the review is likely to revisit. For how GENIUS sets reserve rules, see our guide to GENIUS Act implementation.

Why the review was fast-tracked

The Committee has not spelled out its reasons beyond recent market developments, but the context is not hard to read. When the standard was drafted in 2022, stablecoins were a niche crypto trading tool with no comprehensive legal framework in the US or EU. By late 2025 both had statutes, and total supply was climbing towards the record of roughly USD 321 billion it reached in May 2026. A capital regime that leaves regulated stablecoins in a punitive bucket risks pushing activity outside banks rather than keeping it inside supervised institutions.

The counter-argument is the one the FATF makes in its July 2026 update: stablecoins are now a rising risk across crime types, from scam centres to terrorist financing, because they move value quickly across borders. Supervisors who loosen capital rules will want strong integrity controls in return. Our explainer on the stablecoins and bank deposits debate covers the financial stability side.

Our view: the review should make it possible for a well-regulated, fully reserved stablecoin to sit alongside a tokenised deposit in a bank's balance sheet without a 12-fold capital penalty, while keeping Group 2 expensive. The Basel tests on reserves, redemption and disclosure are sound. The harder questions are about the networks the tokens run on and the entities in between, and that is where the Committee has the most room to refine.

What to watch next

• 12 November 2026: the EBA takes over direct supervision of USDC's own funds, reserves, liquidity and redemption plans, a test of how a significant stablecoin is overseen in practice.
• Next Basel Committee meetings: any consultative document from the expedited review of targeted elements of SCO60, which would show which conditions are being reconsidered.
• First DIS55 disclosures: with the disclosure chapter in force from 1 January 2026, banks' first public crypto exposure templates under the standard will show how much crypto activity actually sits on balance sheets.
• National transposition: how quickly members write the revised standard into local rules, given the Committee asked members to implement the 2024 version by 1 January 2026.

This article summarises prudential standards for general information and is not legal, regulatory or investment advice. Banks should rely on the Basel Framework text and their national supervisor's implementing rules.

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