A draft rule report presented by the European Parliament obliges EU banks to assign crypto assets the highest possible risk weight.
The draft rule asks the banks to apply a 1,250% risk weight on their exposure to digital assets. The proposal must be voted on by the EU Council and Parliament before it can be implemented throughout all of the EU’s member states.
Financial institutions will be compelled to disclose their direct and indirect exposure to cryptocurrencies while the European Commission develops more specific rules for the sector.
Additionally, banks must maintain minimum capital reserves corresponding to the risks associated with each crypto exposure. Up until December 2024, the banks must continue to maintain 100% capital requirements for all crypto exposures.
The parliament’s Economic and Monetary Affairs Committee stated “The potentially increasing involvement of [financial] institutions in crypto-assets related activities should be thoroughly reflected in the Union prudential framework, in order to adequately mitigate the risks of these instruments for the institutions’ financial stability.”
Last month, European Union delayed the vote on MiCA to April as difficulties were encountered when translating the roughly 400-page document into the 24 official languages of the union.
MiCA seeks to include supervisory provisions, consumer protections, and environmental safeguards in the current agreement across the 27 member states.