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EU tightens rules for banks holding cryptocurrency

European Union lawmakers have backed a draft law to implement the final leg of post-financial global bank capital rules, adding prohibitive requirements to cover risks from crypto assets.

By Staff

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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.

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.”

This implies that the action will limit the number of unbacked assets, such as Bitcoin and Ethereum, that the lenders can hold prior to the European Commission proposing additional regulations.

Reuters reportedly shed light on a clause that was revealed before the voting took place. 

“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,” Reuters stated.

According to Reuters, the final deal will come into effect in 2025. Furthermore, the EU is keen to build up strategic autonomy in capital markets as it faces a competing financial centre on its doorstep after Brexit.


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