Bitcoin Derivatives Included in Federal Reserve Stress Tests: A New Regulatory Shift Coming in 2026

As banks’ exposure to Bitcoin and related derivatives continues to expand, the Federal Reserve’s 2026 stress testing framework faces new scrutiny. According to NS3.AI’s analysis, the Fed’s current stress testing plan does not yet include Bitcoin price shock factors, but this situation may change.

Rapid Growth of Bank Exposure to Crypto Assets

Financial institutions’ access to Bitcoin has expanded from a single direct holding to multiple dimensions. Banks have increased their Bitcoin exposure through custody services, spot exchange-traded funds (ETFs), and derivatives trading. These derivatives include futures contracts, options, and other risk transfer instruments. While they provide hedging mechanisms for banks, they also introduce complex risk management challenges. This multi-layered exposure means that sharp price fluctuations of a single asset could trigger a chain reaction in the financial system.

Why Derivatives Risk Deserves Special Attention

The leverage characteristics and counterparty risks in the derivatives market make it a key consideration in stress testing. Unlike direct Bitcoin holdings, losses from derivatives contracts can be amplified, especially in scenarios of market liquidity drought. Past stress tests by the Fed have repeatedly shown that during extreme market conditions, the derivatives market can become a hub for risk propagation.

Gradual Regulatory Inclusion Roadmap

The Fed has not committed to immediately including Bitcoin in the 2026 stress tests, but the central bank may adopt a phased approach. This inclusion process will be evaluated based on factors such as data sufficiency and availability, the significance of Bitcoin exposure on banks’ balance sheets, and the completeness of historical price volatility data. This cautious approach ensures that the regulatory framework evolves in tandem with market realities.

The Need for a Standardized Management Framework

If Bitcoin and related derivatives are ultimately incorporated into stress testing, it will drive the industry to establish more standardized risk management practices. Banks will need to develop more sophisticated models to assess the performance of derivatives portfolios under different market scenarios. This not only enhances industry compliance requirements but also provides clearer operational frameworks for financial institutions involved in crypto asset activities.

This potential shift by the Federal Reserve reflects the increasing importance of crypto assets in the financial ecosystem, especially as the rapid expansion of the derivatives market has become a significant source of systemic risk. By including Bitcoin factors in stress testing, the Fed will further strengthen the defenses of financial stability.