EU Lawmakers Vote To Strictly Regulate Banks Holding Bitcoin And Crypto

According to a Reuters article, lawmakers in the European Union have imposed strict capital requirements on banks holding cryptocurrencies. Markus Ferber, the economic spokesman for the European People's Party in the EU parliament, claims that banks will be required to keep one euro of their capital for every euro they have in cryptocurrencies to “prevent instability in the crypto world from spilling over into the financial system.” Lawmakers point to the recent market chaos as additional proof that such regulation is required.

The adoption of this law is anticipated to be a component of a larger package of rules aimed at bringing the EU into compliance with international standards, especially since recent events like the failure of FTX, Celsius, and others are still fresh in users' minds.

The Basel Committee of the Bank for International Settlements also recommended the highest risk tier weighting for holdings of “unbacked crypto,” which is reflected in the passed regulation. The amount of Tier 1 capital that could be held in unbacked cryptocurrencies was capped at 2% in their recommendations. The Association for Financial Markets in Europe (AFME), an EU lobby group representing finance organizations like investment banks, stated that the requirement might apply to tokenized securities as well as the non-traditional crypto assets the interim treatment is targeted at, indicating that the current form of the law may be unclear. Still, that draft issues may be resolved later on.

The Economic and Monetary Affairs Committee of the European Parliament approved the measures. However, they 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 to be fully implemented.