The European Union is gearing up to fast-track the implementation of tough capital rules for banks holding cryptocurrencies and stablecoins.
The establishment of capital requirements for banks’ exposures to crypto assets has a January 2025 deadline set by the global Basel Committee of banking regulators from the world’s major financial centers.
According to a Reuters report, “Banks have expressed interest in trading crypto-assets on behalf of their clients and to provide crypto-assets-related services.”
The European Commission noted, “For the time being, banks have very low crypto-asset exposures and only a limited involvement in providing crypto-asset-related services.”
The final version of the banking law, which may include the regulations on crypto assets, is now being negotiated by the European Parliament and EU states.
According to the Commission, this would provide banks with transparency regarding their needs for crypto-asset exposures and guarantee that risks associated with them are effectively addressed.
The European Commission further advises that to verify that crypto assets are correctly classified, the European Banking Authority (EBA) could collaborate with the EU’s securities watchdog: the European Securities and Markets Authority (ESMA).
Banks looking to enter the crypto industry may experience delays as a result of a regulatory rollout snag. The EU may either suggest new legislation or amend the financial regulations it is currently finalizing.
Last month, the European Union delayed the vote on MiCA which is set to be the first major regulatory framework for the crypto industry. The MiCA vote has now been delayed twice due to problems with its translation.
Recently, the European Parliament obliges EU banks to assign crypto assets a 1,250% risk weight on their exposure to digital assets. Financial institutions will be compelled to disclose their direct and indirect exposure to crypto while the European Commission develops more specific rules for the sector.
