EU Lawmakers Impose ‘Prohibitive’ Requirements on Banks’ Crypto
The European Parliament's Economic and Monetary Affairs Committee voted to impose strict restrictions on banks seeking to hold crypto.
The measures, a leaked version of which was reported by CoinDesk Monday, are a bid to anticipate international norms that would limit the amount of unbacked assets such as bitcoin (BTC) and ether (ETH) lenders can hold before the European Commission proposes more extensive rules.
In the meantime, “banks will be required to hold a euro of own capital for every euro they hold in crypto," Markus Ferber, the economic spokesperson for the parliament's largest political grouping, said in a statement. “Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.”
“Over the past couple of years, we have seen that crypto assets are high-risk investments,” he said.
The Association for Financial Markets in Europe (AFME), a lobby group that represents traditional finance organizations such as investment banks, raised concerns that the scope of the amendment may be too wide.
“There is no definition of crypto assets in the [legislation] and therefore the requirement may apply to tokenized securities, as well as the non-traditional crypto assets the interim treatment is targeted at,” AFME said in an emailed statement, calling for drafting issues to be dealt with later in the legislative process.
The move mimics rules set out by the Basel Committee on Banking Supervision, the international standard-setter for the industry, which has proposed that holdings of unbacked crypto should be given the highest possible risk weighting, and also be limited as a proportion of a bank’s total issuance of core financial instruments.
In order to pass into law, the measures still need approval from the European Parliament and also have to be negotiated with national finance ministers who meet in the Council of the European Union (EU), as part of a fuller package of bank capital reforms.