"Prudential treatment of cryptoasset exposures"
https://www.bis.org/bcbs/publ/d519.pdf

This was easily found using a Search once I heard the title.

This publication is available on the BIS website (www.bis.org).
© Bank for International Settlements 2021 All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated.

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"Group 1 cryptoassets include tokenised traditional assets (Group 1a) and cryptoassets with effective stabilisation mechanisms (Group 1b)."

"Group 2 cryptoassets. Those that fail to meet any of the classification conditions below"

-- "..either is a tokenised traditional asset or has a stabilisation mechanism that is effective at all times.."
-- "cryptoasset arrangements that meet the condition above are clearly defined and legally enforceable in jurisdictions"
-- "designed and operated to sufficiently mitigate and manage any material risks"
-- "Entities that execute redemptions, transfers, or settlement finality of the cryptoasset are regulated and supervised." PDF

[ "A virtual store for crypto assets, like a painting of a futuristic mall." by Dezgo]

"Banks are responsible for: (i) assessing on an ongoing basis, whether a cryptoasset is compliant with the classification conditions; and (ii) demonstrating to supervisors how a cryptoasset fulfils these conditions. To this end, banks should have in place the appropriate risk management policies, procedures, governance, human and IT capacities to evaluate the risks of engaging in cryptoassets and implement these accordingly on an ongoing basis." PDF

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"To calculate RWA for cryptoassets in illustrative example 1, the bank must include in risk-weighted assets the sum of the following two amounts:

• The risk weighted assets applicable to a direct holding of the underlying traditional asset.13

• The value of the cryptoasset holding multiplied by the risk weight applicable to an unsecured loan to the redeemer.

As with exposures to traditional assets, the specific risk weights referenced in the two elements above will depend on factors," PDF

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I tried asking GPT-J which assets might fall into Group 1 or 2 but the most interesting response generated so far is;

"If all the cryptocurrencies in Group 1 were to be liquidated and converted into Fiat-Currencies, where would be the resulting loss? What would the resulting balance sheet look like? If all the cryptocurrencies in Group 2 were to be liquidated and converted into Fiat-Currencies, where would be the resulting loss? What would the resulting balance sheet look like?"

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Read This Report, which is already 18 months old.

-- CBDC's are coming Oct 18, 2022
-- CBDC Document Links Mar 12, 2022
-- Fed Releases CBDC document Jan 21, 2022
-- Bank lending goes negative in 2021 Oct 12, 2021
-- RBIH - Reserve Bank Innovation Hub May 29, 2022

^ Here are a few other related posts. Will banks start holding Bitcoin?