European Banking Authority finalized regulations requiring banks hold significant more capital to protect against so-called “unbacked” Bitcoin, Ether and other cryptocurrencies are gaining popularity.
The final version of the regulatory technical standards released On Tuesday, EBA stated that rules will be implemented to protect consumers. “address implementation aspects and will ensure harmonisation of the capital requirements on crypto-asset exposures by institutions across the EU.” This framework is applicable to banks in the European Union that have crypto assets listed on their balance sheet.
According Digital assets of group 2(a) and (b) must be accompanied by the documentation. “a general 1,250%” risk weight. The group 2b is the risk weight. “other” Bitcoin and other crypto-assets, even those that are not backed by a central bank (such as Ethereum) can be considered unbacked.BTC). A subcategory within the Bank for International Settlements’ hedging and netting guidelines, Group 2a includes assets meeting the Bank’s criteria. criteria.
This group is composed of tokens that have been linked to financial instruments. This group has a risk weight of 250%.
The risk weights used were introduced as part of the Capital Requirements Regulation (CRR IIITake a look at the photos below. effect In July 2024,
It adds technical elements to the EBA draft that are needed for calculating and aggregating crypto-exposures. These include credit-risk, counterparty-risk, and market-risk models. The draft also includes strict asset separation, meaning Bitcoin (and Ether) are separated.ETHThey cannot be used in conjunction with each other.
Brussels has up to 3 months from the date the final draft is sent to the European Commission to make any changes. decide The bill can be endorsed as-is, with or without amendments or sent back to be redrafted. Bills are endorsed after they have been approved. become A delegated rule will be sent to both the European Parliament as well as the Council. The three month objection period can also be extended to six months.
The EU Official Journal will publish the EU draft within 20 working days of publication if the European Parliament and the Council do not object.
Related: US bank lobby challenges crypto firms’ bids for bank licences
EBA adopts crypto-specific rules
These rules will directly impact European banks that already hold crypto assets on their balance sheet. Italian bank Intesa Sanpaolo is one of the first to adopt these rules. bought 1 million euros worth of Bitcoin in JanuaryUnder the new framework, a company would be required to have 12.5 million Euros in capital for each position.
Revolut, a fintech company, is not likely to be impacted by this change. Crypto services provided by the bank are not included in its balance sheet. managed by its non-banking armRevolut Digital Assets Europe Ltd.
Related: Germany’s top banks managing $4.5 trillion+ in assets are going crypto—Here’s what to watch
Europe swimming against the current
The EBA’s position contrasts starkly with the direction global regulators are moving in, which is to embrace crypto within current financial frameworks.
The Federal Deposit Insurance Corporation, or FDIC, stated that in late March it had received a notice from institutions, such as banks, under its supervision. can now engage in crypto-related activities Without prior approval.
In April, Switzerland passed Amendements ot its DLT Act The legal framework should allow banks to offer guarantees, custody and tokenized security for stablecoins.
According to recent reports, US President Donald Trump also plans to sign an Executive Order directing bank regulators to conduct an investigation. claims of debanking made by the cryptocurrency sector Conservators are the opposite.
JPMorgan Chase is reportedly the first US bank to take notice. exploring crypto-backed loansThis could be an indication of a shift in the perceptions that US banks have towards crypto assets.
New EU capital regulations could restrict bank participation on the digital asset market. This is especially true as tokenization and decentralized financing continue to grow in mainstream financial services.
Magazine: Crypto wanted to overthrow banks, now it’s becoming them in stablecoin fight
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Source: cointelegraph.com
