The European Union is calling for banks to quickly implement tough capital rules for holding digital assets, in line with a global deadline, or risk missing out on the crypto market.
The EU is urging banks to implement tough capital rules for holding cryptocurrency quickly to meet the deadline set by the Basel Committee, a group of banking regulators from major financial centers worldwide.
Banks have limited involvement in providing crypto-asset-related services at the moment, but they have expressed interest in trading crypto-assets on behalf of their clients and offering crypto-assets-related services.
Basel has set a deadline of January 2025 for implementing capital requirements for banks’ exposures to digital assets such as Stablecoins and Bitcoin.
If the EU misses this deadline, banks may have to wait longer to enter the cryptocurrency market.
To enforce Basel’s crypto rules, the EU can propose a new law or expand the banking law it is finalizing as requested by the European Parliament.
The Parliament and EU states are due to start negotiating the final text, which may include provisions on digital assets. This would provide banks with clarity on their requirements for crypto-asset exposures and ensure that risks stemming from these are adequately addressed.
The European Commission’s paper also suggests that the bloc’s European Banking Authority could coordinate with the EU’s securities watchdog to ensure that digital assets are properly categorized.
Basel has set punitive capital charges on unbacked crypto currencies like bitcoin and less conservative charges on Stablecoins.
The paper suggests that EBA, in cooperation with the securities watchdog, maintains a list of how existing cryptocurrency are categorized. A separate draft law would not be forthcoming until the end of 2023, the paper added.
