Lawmakers in the European Union have voted to impose strict capital requirements on banks holding cryptocurrencies, according to a report. Reuters Article.
In an effort to “prevent instability in the world of cryptocurrencies from spreading to the financial system,” Markus Ferber, economic spokesman for the European People’s Party in the EU parliament, says that “banks will need to have one euro of equity capital per each euro”. they are held in crypto.”
Lawmakers cite the market chaos seen in recent months as further evidence that such regulation is necessary. With events like the FTX crash, Celsius and others fresh on users’ minds, the passage of this law is expected to be part of a broader set of regulations aimed at bringing the EU in line with international standards.
The approved regulation mirrors that suggested by the Basel Committee of the Bank for International Settlements, which also suggested the highest possible risk level weighting for “unbacked cryptocurrency” holdings. Their recommendations set a 2% limit on Tier 1 capital that could be held denominated in unbacked cryptocurrency.
“There is no definition of crypto assets in the (legislation) and therefore the requirement may apply to tokenized securities as well as non-traditional crypto assets targeted for provisional treatment,” the Financial Markets Association of Europe (AFME), an EU lobby group representing financial organizations such as investment banks said, saying the current form of the law might not be clear, but problems with the draft may be fixed later.
While the European Parliament’s Committee on Economic and Monetary Affairs voted to approve the measures, in order for them to come into full force, they must also be approved by the European Parliament as a whole and presented to national finance ministers meeting in Council. of the European Union.
