- EU Urges Fast-Tracking of Crypto Capital Rules for Banks.
- The Basel Committee of banking regulators from the world’s main financial centers has set a January 2025 deadline.
- The regulations could also include required provisions on Bitcoin, stablecoins, and other crypto assets.
The European Commission has appealed to the European Union to accelerate the implementation of strict capital requirements for banks holding crypto assets. The EU stressed the looming deadline and added that Europe must decide whether to meet it. The new rule will guide banks with crypto assets once implemented.
The Basel Committee, consisting of banking regulators from critical financial hubs worldwide, set the global deadline. The Block decided that banks holding cryptocurrencies like Bitcoin and stablecoins should be subject to capital requirements by January 2025.
The European Commission stated in an informal discussion paper obtained by Reuters:
“For now, banks have very low crypto-asset exposures and limited involvement in providing crypto-asset-related services. Banks have expressed interest in trading crypto-assets on behalf of clients and providing crypto-assets-related services. From an international perspective, it would also allow the EU to fully align itself with the agreed-upon implementation deadline as Base level.”
Negotiations of the Final Version of the Banking Law Currently Ongoing
The Commission Paper asserts that the European Union states and the Parliament has equal input into the bill. The two bodies are currently negotiating the final version of the banking law, which may contain the rules on crypto assets. The European Commission also suggests that the European Banking Authority (EBA) work with the EU’s securities watchdog, the European Securities and Markets Authority (ESMA), to ensure that crypto assets are classed correctly.
An issue with the regulatory rollout may cause delays for banks hoping to enter the cryptocurrency market. The solution would be for The EU to modify the banking regulations it is presently finalizing or introduce new laws.
Last month, the European Union postponed the vote on the Markets in Crypto Assets (MiCA) bill, slated to be the first significant legal framework for the cryptocurrency industry. The MiCA vote has now been postponed twice due to translation issues.
According to the Commission paper, the legislation would provide banks with clarity regarding their needs for crypto-asset exposures and guarantee that the risks posed by these are effectively addressed. From a global standpoint, it would also enable the European Union to align itself with the Basel-level implementation time restriction perfectly.
The paper stated that the earliest a separate draft law would be released was at the end of 2023. An election for the Parliament in the middle of 2024 makes it challenging to pass a new direction by 2025.
Bitcoin and other unbacked cryptocurrencies are subject to penal capital costs imposed by Basel. At the same time, stablecoins backed by assets or fiat money are subject to less restrictive capital charges.
The paper suggests that it could be helpful to demand that the European Banking Authority, in conjunction with the European Securities and Markets Authority, keep a list of the various categories in which crypto assets are now categorized.
