The European Parliament's Economic and Monetary Affairs Committee voted to impose strict restrictions on banks seeking to hold crypto.
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 spokesman 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, a lobbying group that represents traditional-finance firms, 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,” the organization said in an emailed statement, calling for the issues to be dealt with later in the legislative process.
The move from the Parliament's committee 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 as part of a fuller package of bank capital reforms.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.