Response to consultation on Regulatory Technical Standards on the calculation and aggregation of crypto exposure values
Q1: Do you agree that fair-valued crypto-assets within the scope of MiCAR should be included within the scope of the prudent valuation rules? If not, please explain.
Response: Yes, crypto assets within MiCAR should be included under prudent valuation rules.
Challenges: Crypto assets often lack observable market inputs. Where liquidity is thin or pricing mechanisms are unclear, fair value becomes speculative, increasing model risk.
Impact on the Industry: Institutions may misrepresent exposures or manipulate valuation estimates, leading to distorted capital positions and loss of market confidence.
How Risk Accounting Can Help: Risk Accounting enhances prudent valuation by introducing risk-adjusted quantification into valuation practices, addressing the deficiencies of fair value in volatile or opaque markets. It does this by:
- Applying Residual Risk Units (RUs) to measure the expected loss associated with holding a crypto asset, derived from the underlying weaknesses in legal clarity, control environments, redemption rights, and custodial arrangements.
- Embedding valuation within a governance-aware control framework, where the accuracy and trustworthiness of valuation inputs are linked to internal risk assessments.
- Enabling institutions to systematically calibrate valuation haircuts based on residual risk concentrations, rather than solely market pricing or model uncertainty.
In doing so, Risk Accounting converts qualitative concerns into auditable, standardized metrics that enrich fair value with a forward-looking layer of risk transparency.
Q2: Do you have any concern in relation to the application of the requirements specified in Arti-cle 105 CRR and Delegated Regulation (EU) 2016/101(RTS on Prudent Valuation) to crypto-assets? If so, please explain.
Response: It is our belief that these frameworks are inadequate for crypto assets as currently structured.
Challenges: They do not address non-financial risks unique to digital assets, such as code vulnerability, cyber risk, and governance opacity.
Impact on the Industry: Misalignment between valuation rules and risk profiles may lead to systemic blind spots and inconsistent application across institutions.
How Risk Accounting Can Help: Risk Accounting addresses the core limitations of Article 105 and Delegated Regulation 2016/101 by:
- Quantifying non-financial and systemic risks (e.g. technology failure, cyber threats, operational opacity) as residual risk exposures using RUs, which current valuation regimes are not designed to capture.
- Integrating risk data with accounting processes to allow exposure values to reflect operational control conditions, governance deficiencies, and real-time risk accumulation.
- Enabling dynamic reassessment of risk levels through periodic RU recalibration, ensuring that crypto-related risks are continuously monitored as technologies, issuers, and infrastructures evolve.
By embedding this level of granularity into valuation practices, Risk Accounting transforms static, backward-looking models into a forward-integrated measurement regime.
Q3: Do you agree that a one-size fits all RW of 250% should apply also to CCR transactions requiring specifications on netting set treatment (Alternative A) or do you prefer using the counterparty’s RW as is standard in CCR (Alternative B)? Please briefly justify your assessment.
Response: Support for the 250% RW should only be considered as a temporary measure.
Challenges: Reliance on counterparty RW assumes the existence of validated models and consistent risk attribution, which are limited in the current crypto context.
Impact on the Industry: Inconsistent treatment could incentivize regulatory arbitrage or understate exposure.
How Risk Accounting Can Help: Risk Accounting provides a superior alternative to both blunt RW assignment and reliance on counterparty credit ratings by:
- Measuring residual risk exposure on a per-transaction basis, incorporating both counterparty risk and the inherent uncertainty of the underlying crypto instrument.
- Allowing risk-weighted capital requirements to be calibrated against actual measured exposures, rather than broad assumptions or legacy credit frameworks.
- Providing a granular, real-time risk profile that reflects changes in market structure, control environments, and issuer behavior, avoiding both under- and over-capitalization.
This dynamic capability would allow the 250% RW to function as a temporary floor, with institutions transitioning to risk-sensitive capital models as RU-based systems would mature and prove reliable.
Q4: Are there any credit institutions considering implementing the alternative internal model approach during the transitional period, or consider implementing it in the medium to long term? Would there be an impact for the development of the crypto-assets market in the EU, and/or for the capitalisation and/or business activities of European credit institutions, if the use of the alternative internal models approach in the short to medium term is not permitted?
Response: Internal models should not be permitted at this stage.
Challenges: Crypto assets lack robust historical data and validated risk factor models. Early internal models would be untested and highly vulnerable to input bias.
Impact on the Industry: Could lead to undercapitalization, model manipulation, and uneven application of capital rules.
How Risk Accounting Can Help: Risk Accounting acts as an essential foundation for any future internal model use by:
- Replacing qualitative assessments with a standardized, regulator-auditable risk quantification system, enabling supervisory bodies to trust internal models built upon RU-based metrics.
- Reducing model risk and subjectivity by tying risk drivers to control failures, governance lapses, or issuer dependencies—all of which are difficult to model in traditional frameworks.
- Offering a transparent, stress-testable baseline that internal models can build upon, aligning the institution’s internal view of risk with supervisory expectations.
By embedding this capability, Risk Accounting provides the infrastructure and credibility needed to reintroduce internal models in a prudent and data-grounded way.
Q5: Do you agree that the risk of default of the issuer is relevant in certain specific circumstances and therefore should be considered within the scope of this draft RTS during the transitional period or do you believe that the 250% RW for direct credit risk is sufficient to capture for this risk during the transitions period? Please briefly justify your assessment.
Response: Yes, issuer default risk must be explicitly modeled.
Challenges: However, a blanket RW does not differentiate among issuer types, structures, or asset backing. This impedes risk-sensitive supervision.
Impact on the Industry: Potential for mispriced risk and failure to account for issuer concentration in portfolios.
How Risk Accounting Can Help: Risk Accounting offers a precise way to isolate and quantify issuer-specific default risk through:
- Assigning issuer-linked RUs that capture the concentration and volatility of risks specific to individual token issuers, including governance instability, over-leverage, or redemption failure.
- Enabling systemic issuer risk mapping across portfolios, allowing both firms and regulators to understand where exposure is clustered and where contagion could originate.
- Supporting issuer-linked pricing adjustments and internal controls by assigning cost-to-risk metrics that incentivize de-risking or rebalancing of crypto-asset portfolios.
This targeted mechanism allows supervisors to go beyond blunt capital buffers and enforce issuer-specific mitigation strategies, supported by transparent and auditable accounting logic.
Q6: How relevant is it to incorporate this differentiation for crypto-assets exposures referred to in Article 501d (2), point (c), of the CRR at this stage? Are institutions confident that they can assess their crypto-assets exposures against the criteria set out in these draft RTS? Is there sufficient market data available to make those assessments?
Response: Differentiation is premature. Institutions are not currently equipped to assess these exposures consistently.
Challenges: Data gaps, legal uncertainties, and control fragmentation make current assessments unreliable.
Impact on the Industry: Could lead to misclassification, arbitrage, and loss of credibility in regulatory enforcement.
How Risk Accounting Can Help: Risk Accounting enables institutions to systematically quantify residual non-financial risks through a standardized metric (the Risk Unit), which directly supports the type of objective, criteria-based assessments envisioned in Article 501d(2)(c). Specifically, it provides:
- A consistent framework to evaluate risks related to governance, legal structure, redemption mechanisms, and technological dependencies — areas critical to determining prudential treatment.
- A digitally auditable trail of accepted risks, enabling institutions to demonstrate that they have met differentiation criteria without relying on subjective or ad hoc judgments.
- Comparability across institutions by ensuring that all exposures are measured and reported using the same quantification method, allowing supervisors to validate differentiation decisions with confidence.
By embedding quantification into the internal control environment, Risk Accounting ensures that institutions are not simply guessing at crypto-asset risk distinctions — they are measuring and proving them.
Q7: For ARTs subject to the calculation of own fund requirements for market risk in this para-graph, do you agree that the risk of default of the issuer is relevant in certain specific circum-stances and therefore should be considered within the scope of these draft RTS during the tran-sitional period as per Article 3(4)(d) or do you believe that the 250% RW for direct credit risk is sufficient to capture for this risk during the transitions period? Please briefly justify your as-sessment.
Response: Issuer default risk should be reflected in market risk assessments for ARTs.
Challenges: Traditional market risk metrics fail to capture de-pegging events, redemption risk, or opaque issuer obligations.
Impact on the Industry: Undercapitalization of high-risk ART exposures could create systemic interdependencies.
How Risk Accounting Can Help: Risk Accounting directly addresses the issuer-specific vulnerabilities associated with Asset-Referenced Tokens (ARTs) by:
- Assigning issuer-level residual risk values using the Risk Unit methodology, which captures weaknesses in backing assets, transparency, legal claims, and redemption structures.
- Enabling the creation of granular exposure maps that link each ART to its issuer’s risk profile, allowing banks to monitor risk accumulation and concentration in near real-time.
- Supporting scenario analysis and stress simulations that incorporate not just market factors, but also operational, legal, and systemic stress triggers that could lead to issuer default.
- Allowing regulators to compare ART exposure quality across institutions using standardized, regulator-verified data.
These capabilities elevate the analysis from a blunt capital charge to a dynamic and auditable assessment of issuer-specific risk, filling a gap in current RTS proposals.