EU Tightens Rules for Banks Holding Cryptocurrency

Lavina Daryanani
Source: Euronews

European lawmakers voted on Tuesday and decided to make banks holding cryptocurrencies follow more stringent measures. The Parliament’s Economic and Monetary Affairs Committee has reportedly tightened the capital requirement to hold digital assets.

‘Prohibitive’ measures introduced

According to Markus Ferber, a member of the European parliament, banks will have to hold a euro of their own capital for every euro they hold in cryptocurrency. The regulator further stressed that crypto assets are “high-risk investments.” Explicitly elaborating on why such a measure was the need of the hour, Ferber said,

“Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.”

Also Read: EU Lawmakers to Reportedly Introduce Tighter Crypto Rules for Banks

This also means that the move will put a cap on the number of unbacked assets like Bitcoin and Ethereum that the lenders can hold before the European Commission puts forward more rules.

A Reuters report from Monday shed light on a clause that was revealed before the voting took place. Reportedly,

“One amendment states that banks would have to apply a risk-weighting of 1,250% of capital to crypt assets exposures, meaning enough to cover a complete loss in their value.”

As Reuters reported a day back, the final deal will come into effect in 2025.

Leaving aside the latest development, regulators from around the world have similarly been taking steps to shield investors. Just a day back, South Africa’s Advertising Regulatory Board announced new guidelines. Advertisers have been mandated to provide disclaimers. They have also been advised not to take undue advantage of users’ lack of knowledge.

Read More: South Africa: New Cryptocurrency, NFT Advertising Rules Reinforced

Furthermore, the French National Assembly, on the other hand, is all set to hold a debate today on whether cryptocurrency firms will need to follow a strict license regime in the coming year.