EU Lawmakers Approve ‘Prohibitive’ Crypto Rules

Image Credit: European Parliament

European Union lawmakers vote to approve draft law that includes ‘prohibitive’ restrictions for banks holding crypto assets

A European Parliament committee has voted to approve draft capital rules that would introduce “prohibitive” restrictions on banks that hold crypto assets.

The parliament’s economic affairs committee approved a draft law to implement Basel III capital rules from January 2025, although with several temporary divergences to give banks time to adapt.

The measures are an effort to anticipate international norms as the European Commission works out more extensive rules.

The restrictive measures around digital assets follow recommendations by the Basel Committee on Banking Supervision, which sets international standards for the banking industry.

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Crypto risk

The committee has proposed that holdings of unbacked crypto should be given the highest possible risk weighting and be limited as a proportion of a bank’s total issuance of core financial instruments.

The proposed law means that “banks will be required to hold a euro of own capital for every euro they hold in crypto,” said Markus Ferber, economic spokesperson for the parliament’s largest political grouping.

“Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.”

He added that recent years have shown that “crypto assets are high-risk investments“.

‘Overly broad’

The Association for Financial Markets in Europe (AFME), a banking industry body, said the scope of the measure may be too broad.

It argued the legislation includes “no definition of crypto assets” which could lead to the requirement being applied to tokenised securities, in addition to the non-traditional digital assets the measure targets.

The draft still requires approval from the European Parliament as a whole as well as national finance ministers in the Council of the European Union.