You are viewing CRYPTOPRU 4.5 K-factor requirement for qualifying cryptoassets and relevant specified investment cryptoassets that are safeguarded (K-RCS) as it appeared on 25/10/2027. The current version of CRYPTOPRU 4.5 K-factor requirement for qualifying cryptoassets and relevant specified investment cryptoassets that are safeguarded (K-RCS) was last updated on 25/10/2027.

CRYPTOPRU 4.5 K-factor requirement for qualifying cryptoassets and relevant specified investment cryptoassets that are safeguarded (K-RCS)

25/10/2027R

The K-RCS requirement of a firm that is safeguarding cryptoassets is equal to 0.04% of its average RCS.

25/10/2027G
  1. (1) The definition of RCS only includes the qualifying cryptoassets and relevant specified investment cryptoassets in respect of which the firm is carrying on the activity of safeguarding cryptoassets. Any other qualifying cryptoassets and relevant specified investment cryptoassets do not therefore need to be included in a firm’s calculation of the K-RCS requirement (except to the extent that CRYPTOPRU 4.5.3R applies).
  2. (2) As part of its overall risk assessment, a firm should also consider risks arising from amounts it may be obliged to return to a client which do not amount to the regulated activity of safeguarding cryptoassets. An example would be obligations to a client under a title transfer collateral arrangement where that client is not a ‘consumer’ (as those terms are defined at article 9N(5) of the RAO).
25/10/2027R

Where a firm is subject to both CRYPTOPRU and MIFIDPRU, it is not required to include in the calculation of K-RCS relevant specified investments cryptoassets already captured in the K-ASA requirement.

25/10/2027R

If a firm is unsure whether qualifying cryptoassets and relevant specified investment cryptoassets are held in the course of safeguarding cryptoassets, it must treat those qualifying cryptoassets and relevant specified investment cryptoassets as being held in the course of safeguarding cryptoassets for the purposes of calculating K-RCS.

Calculating RCS

25/10/2027R

A firm must calculate its K-RCS requirement:

  1. (1) on the first business day on which CRYPTOPRU applies to the firm; and
  2. (2) thereafter, on the first business day of each month.
25/10/2027R

A firm must calculate its average RCS by:

  1. (1) taking the total RCS as measured at the end of each business day for the previous 9 months;
  2. (2) excluding the values for the most recent 3 months; and
  3. (3) calculating the arithmetic mean of the daily values for the remaining 6 months.
25/10/2027R

A firm must include the value of the relevant qualifying cryptoassets and relevant specified investment cryptoassets in its measurement of RCS in both of the following situations:

  1. (1) the firm has appointed a third party to carry out the activity of safeguarding cryptoassets which the firm has undertaken to its client to safeguard; or
  2. (2) a third party has appointed the firm to carry out the activity of safeguarding cryptoassets.
25/10/2027G
  1. (1) The effect of CRYPTOPRU 4.5.7R is that a firm will not reduce its level of RCS by appointing a third party to carry out the activity of safeguarding cryptoassets.
  2. (2) However, a firm will increase the level of its RCS by accepting the appointment from a third party to carry out the activity of safeguarding cryptoassets.
  3. (3) This reflects the harm that may result from a breach of the firm’s direct safeguarding responsibilities or the firm’s responsibilities in relation to the selection, appointment and periodic review of any third party which the firm has appointed to carry out the activity of safeguarding cryptoassets.

Firms with less than 9 months of data on RCS

25/10/2027R

Where a firm has been safeguarding cryptoassets for less than 9 months, it must calculate its average RCS as follows:

  1. (1) during the first month in which it is safeguarding cryptoassets, the firm must:
    1. (a) make a best-efforts estimate of expected RCS for that month; and
    2. (b) use that estimate as its average RCS; and
  2. (2) during the subsequent 8 months, the firm’s average RCS must be calculated in accordance with CRYPTOPRU 4.11.1R(2).
Point In Time
25/10/2027