European Union legislators have voted in favor of imposing rigorous capital requirements on banks that hold Bitcoin and cryptocurrencies.
Economic spokesperson for the EU parliament’s European People’s Party Markus Ferber states that “banks will be required to hold a euro of their own capital for every euro they hold in crypto.”
Ferber mentioned that this was done in an effort to help prevent volatility in the crypto sector from spilling over into the financial system.
Lawmakers point to the recent volatility in the markets as additional proof that legislation is required. The adoption of this law is likely to be a component of a wider package of rules aimed at bringing the EU into compliance with worldwide standards. Incidents like the failure of FTX, Celsius, and others have also likely added to the decision of voting for more regulation.
The Bank for International Settlements’ Basel Committee also recommended the highest risk tier weighting for holdings of “unbacked crypto.” The amount of Tier 1 capital that might be held in unbacked cryptocurrencies was capped at 2% in their recommendations.
The Association for Financial Markets in Europe (AFME) stated that “there is no definition of crypto assets in the [legislation] and therefore the requirement may apply to tokenized securities, as well as the non-traditional crypto assets the interim treatment is targeted at.”
The Economic and Monetary Affairs Committee of the European Parliament accepted the measures, but will still need to be approved by the entire European Parliament and presented to the national finance ministers meeting in the Council of the European Union in order to be fully implemented.