EU Reaches Agreement on Regulation of Crypto Assets in Banking Sector

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The EU has reached an agreement on changes to the Capital Requirements Regulation and Directive, including new regulations for crypto assets.

The move comes in response to calls from lawmakers for tough rules to prevent “unbacked cryptocurrencies” from infiltrating the mainstream financial system.

The announcement of this agreement was made public via a tweet from the Economic and Monetary Affairs Committee of the European Parliament. The tweet follows a meeting that brought together representatives of the European Parliament, national governments and the European Commission, the body that originally proposed these rules in 2021.

Make banks more resilient with a prudential regime for crypto assets

Sweden’s finance minister, who chaired the talks on behalf of EU member states, said the new rules, which also recalibrated risk weightings for bank assets such as corporate loans, were intended to “strengthen the soundness and resilience” of the banks operating in the Syndicate. The Board’s statement further confirmed that the deal includes a “transitional prudential regime for crypto assets, without providing further details.”

Preliminary details suggested a hardline stance, with a maximum possible risk weight of 1,250% assigned to floating cryptocurrencies. This would have meant that banks would have to issue one euro of capital for every euro of Bitcoin (BTC) or Ether (ETH) they hold, thus discouraging them from investing in the market.

However, during the discussions, the European Commission proposed a more flexible position for regulated stablecoins. This proposal seems to have found favor with EU governments.

Anticipating rule changes in 2025

The deal now requires approval by member states in the EU Council and lawmakers, which could take several months.

The final version of the text will be published alongside the new banking rules introduced by the Basel Committee on Banking Supervision, the global standards body for banking regulation. These rules are expected to be implemented by January 1, 2025. Although the final agreed text is not currently available, transitional arrangements will be in effect until January 2025, when the international Basel III rules are expected to come into effect. in force.

The aim is to mitigate the potential risks faced by institutions due to their exposure to crypto-assets, which are not sufficiently taken into account by the existing prudential framework. The committee suggested that a bank’s exposure to certain crypto assets should not exceed 2% and should generally be less than 1%.

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