EU banking regulator finalizes capital rules for banks holding Bitcoin, Ether

The European Banking Authority (EBA) has finalized rules requiring banks to clasp importantly much superior against alleged “unbacked” cryptocurrencies similar Bitcoin and Ether.

In its last draught of regulatory method standards released connected Tuesday, the EBA said the rules purpose to “address implementation aspects and volition guarantee harmonisation of the superior requirements connected crypto-asset exposures by institutions crossed the EU.” The model applies to European Union-based banks holding crypto assets connected their equilibrium sheets.

According to the accompanying documentation, integer assets successful radical 2 (a and b) are taxable to “a wide 1,250%” hazard weight. Group 2b refers to “other” crypto assets, including unbacked ones specified arsenic Bitcoin (BTC). Group 2a refers to a subcategory of the aforesaid assets that conscionable the Bank for International Settlements’ hedging and netting criteria.

Group 1 b refers to alleged asset-referenced tokens tied to accepted fiscal instruments. This radical is taxable to a 250% hazard weight.

Those hazard weights were introduced arsenic portion of the Capital Requirements Regulation (CRR III) and took effect successful July 2024.

The latest EBA draught adds the method elements needed to cipher and aggregate crypto exposures, specified arsenic credit-risk, market-risk and counterparty-risk modeling. It besides introduces strict separation betwixt assets, meaning Bitcoin and Ether (ETH) cannot beryllium offset against each other.

Once the last draught goes to the European Commission, Brussels volition person up to 3 months to decide whether to endorse it arsenic is oregon with amendments, oregon nonstop it backmost for redrafting. After endorsement, the measure would become a delegated regularisation and beryllium forwarded to the European Parliament and the Council, with a three-month objection model extendable to six.

If neither the European Parliament nor the Council objects, the draught volition travel into effect wrong 20 days of its work successful the Official Journal of the EU.

Tour Europlaza, the gathering hosting the EBA. Source: Wikimedia

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EBA finalizes strict crypto rules

The rules are expected to straight impact European banks already holding crypto connected their equilibrium sheets. Italian slope Intesa Sanpaolo, which bought 1 cardinal euros worthy of Bitcoin successful January, would request to clasp 12.5 cardinal euros successful superior against that presumption nether the caller framework.

Fintech steadfast Revolut is improbable to beryllium affected by the change. The bank’s crypto services are off-balance-sheet and managed by its non-banking arm, Revolut Digital Assets Europe Ltd.

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Europe swims against the tide

The EBA’s stance contrasts sharply with the broader absorption of planetary regulators moving toward embracing crypto wrong existing fiscal frameworks.

In precocious March, the Federal Deposit Insurance Corporation (FDIC) stated successful a missive that institutions nether its oversight, including banks, can present prosecute successful crypto-related activities without anterior approval.

In April, Switzerland passed amendments ot its DLT Act enabling banks to custody tokenized securities and connection guarantees for stablecoin issuers nether a wide ineligible framework.

Recent reports besides suggest US President Donald Trump is readying to motion an enforcement bid directing banking regulators to analyse claims of debanking made by the cryptocurrency sector and conservatives.

The US banking assemblage is already taking notice, with JPMorgan Chase reportedly exploring crypto-backed loans, signaling a imaginable displacement successful however US banks presumption crypto assets.

The caller EU superior rules could bounds slope information successful the increasing integer plus market, particularly arsenic decentralized concern and tokenization proceed to grow into mainstream fiscal services.

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