Virtual Assets as a Factor in the Transformation of Risks in the Banking System

Abstract

Abstract: The financial stability of the banking system constitutes a key precondition for the effective functioning of the economy, as the banking sector performs the transformation of savings into financing, manages liquidity, and ensures the operation of payment systems. One of the pressing challenges in banking regulation is the proliferation of virtual assets, which creates new channels for the transmission of risks to the banking system even in the absence of direct bank involvement in related operations. In this context, the systematization of the mechanisms through which virtual assets affect banking risks, as well as the development of an appropriate regulatory toolkit, becomes increasingly important. The study aims to substantiate the directions for adapting the prudential regulation of the National Bank of Ukraine to the conditions of virtual asset proliferation, based on the systematization of banking system risks and the development of methodological tools for assessing banks’ exposures to virtual assets. Methods. The study employs qualitative analysis based on the synthesis of empirical findings from prior research, international prudential standards (in particular, BCBS SCO60), the regulatory framework of the National Bank of Ukraine, and international experience in integrating virtual assets into banking activities. Risk assessment is conducted using a matrix approach with classification by probability of occurrence and potential loss. A multifactor model for applying a haircut to the value of collateral in virtual assets is developed, integrating volatility, market liquidity, legal, and tail risks. Results. It is substantiated that the Ukrainian banking system is already subject to indirect effects of virtual assets through the foreign exchange channel, manifested in changes in depositor behavior, increased volatility of deposit balances, and deterioration in the quality of loan portfolios. Banking risks are systematized across credit, market, liquidity, and operational dimensions. A risk assessment matrix is constructed, along with a classification of on-balance-sheet and off-balance-sheet exposures of banks to virtual assets, and a comparative evaluation of recommended loan-to-value (LTV) ratios for different categories of collateral. It is demonstrated that liquidity constitutes the most sensitive channel for shock transmission, particularly due to increased elasticity of the deposit base and effects associated with the functioning of stablecoins. Conclusions. Virtual assets do not generate fundamentally new types of banking risks; however, they significantly modify the intensity and interconnections of traditional risks, which are amplified by the bank-centric structure of Ukraine’s financial system. The application of the proposed methodological toolkit contributes to the formation of a scientifically grounded basis for the preventive adaptation of prudential regulations of the National Bank of Ukraine, ensuring the preparedness of the regulatory environment for the integration of virtual assets into the operational model of Ukrainian banks.