EU Banks Must Comply With Stiffer Regulations Regarding Their Crypto Holdings

Key Points:

• MPs agreed that banks holding cryptocurrency must adhere to severe legislation to maintain capital needs.
• European Commission should “examine whether a dedicated prudential approach for crypto assets would be needed and to develop, if suitable, a legislative proposal to this purpose.”

Following a vote in a committee of the European Parliament on Tuesday, MPs agreed that banks holding cryptocurrency must adhere to severe legislation to maintain capital needs.

According to Reuters, an amendment to a measure governing financial capital requirements for traditional institutions was sneaked in before the vote and suggested that banks apply a risk-weighting of 1,250% to exposures to crypto-assets. This means that banks will need to be able to cover a shortfall with capital reserves and not be able to develop leverage when the laws take effect. The Basel Committee on Banking Supervision, which establishes global banking regulations, advocated the % as the highest level of securitization. Basel III changes.

According to the draft report, the bill also specifies that the European Commission should “examine whether a dedicated prudential approach for crypto assets would be needed and to develop, if suitable, a legislative proposal to this purpose.”

The organization, which is based in Switzerland, published a report in December that included fresh recommendations for how banks should handle their exposure to digital assets.

The Basel Committee’s work will continue to be mentioned by EU politicians.

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