EU looks to place limit on banks holding crypto

European Union lawmakers have voted in favor of a draft bill that imposes “prohibitive” capital requirements on banks holding crypto assets, citing the need for stricter regulations as evidenced by the chaos in the industry over the past few months. 

See related article: Weekly Market Wrap: Bitcoin up over 21% in best weekly performance since Feb. 2021. Bull run or bull trap?

Fast facts

  • The bill mirrors a policy proposed by the Bank for International Settlements Basel Committee, which would classify unbacked crypto holdings in the highest possible risk tier, placing a 2% capital limit on banks holding unbacked cryptocurrencies.
  • “Banks will be required to hold a euro of their own capital for every euro they hold in crypto,” Markus Ferber, a center-right German member of the European Parliament, said in a statement.
  • “Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system,” Ferber added.
  • The draft bill is expected to be implemented in January 2025, if the European Parliament approves a final version.
  • The Association for Financial Markets in Europe said that the proposal does not define crypto assets and could hence also be applied to tokenized securities.

See related article: ECB’s Christine Lagarde: Further crypto regulation ‘absolute necessity’ following FTX collapse

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