EU Urges Banks To Adopt Crypto Capital Regulations Quickly

If Europe wants to meet a globally agreed-upon deadline, strict capital requirements for banks holding cryptoassets must be fast-tracked in the pending banking law of the European Union, according to the bloc’s executive.

The implementation of capital requirements for banks’ exposures to cryptoassets like stablecoins and bitcoin has a January 2025 deadline set by the global Basel Committee of banking regulators from the major financial centers of the world.

“For the time being, banks have very low crypto-asset exposures and only a limited involvement in providing crypto-asset-related services,” the European Commission said in an informal discussion paper seen by Reuters.

“Banks have expressed interest in trading crypto-assets on behalf of their clients and to provide crypto-assets-related services.”

A law in the EU implements Basel’s standards, and if that law is delayed, banks may have to wait longer to enter the cryptocurrency market when new EU regulations for trading cryptoassets take effect in 2024.

The EU could either propose a new law or, as requested by the European Parliament, amend the banking law it is currently finalizing in order to enforce Basel’s crypto regulations.

The provisions on cryptoassets could be included in the banking law’s final text, which is currently being negotiated by the Parliament and EU states, according to the paper.

According to the Commission paper, this would provide banks with clarity regarding their needs for crypto-asset exposures and ensure that risks associated with them are adequately addressed.

“From an international perspective, it would also allow the EU to fully align itself with the implementation deadline agreed on at Basel level.”

The earliest a separate draft law would be released is at the end of 2023, according to the paper. The mid-2024 elections for Parliament make it more challenging to pass a new law in time for 2025.

The Commission paper also suggests that in order to ensure that cryptoassets are properly classified, the European Banking Authority (EBA) of the EU could collaborate with the EU’s securities watchdog ESMA.

Basel has established punitive capital charges for cryptocurrencies like bitcoin that are unbacked, and less restrictive capital charges for stablecoins that are backed by assets or fiat money.

The paper suggested that it might be beneficial to require ESMA and EBA to keep a list of the various categories in which cryptoassets are currently categorized.

(Adapted from

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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