Coindesk Logo

EU Banks Told by Regulator to Apply Bitcoin Caps Even Before They Become Law

EU Banks Told by Regulator to Apply Bitcoin Caps Even Before They Become Law

EU Banks Told by Regulator to Apply Bitcoin Caps Even Before They Become Law

The European Central Bank, which supervises big euro area lenders, said crypto should be treated as a risky asset.

The European Central Bank, which supervises big euro area lenders, said crypto should be treated as a risky asset.

The European Central Bank, which supervises big euro area lenders, said crypto should be treated as a risky asset.

AccessTimeIconFeb 15, 2023, 10:40 AM
Updated Feb 15, 2023, 6:00 PM
European Central Bank (Raimund Linke/Getty Images)

Banks in the European Union should start applying caps on bitcoin holdings ahead of global norms set by the Basel Committee on Banking Supervision (BCBS) taking effect, supervisors at the European Central Bank said Wednesday.

While crypto has not yet made significant inroads into the bloc’s banks, the ECB said they should treat the assets as risky and limit holdings right away.

“The BCBS standard is not yet legally binding pending its transposition in the European Union,” said a newsletter from the ECB, which is responsible for directly supervising the largest banks in the currency bloc. “However, should banks wish to engage in this market, they are expected to comply with the standard and take it into account in their business and capital planning.”

The BCBS recently proposed to assign the highest possible risk weight of 1,250% to unbacked digital assets such as bitcoin (BTC), meaning banks have to issue capital equal to their crypto holdings. They would also be limited to holding crypto in amounts not exceeding 1% of their core capital known as Tier 1.

BCBS norms don’t have legal effect, though some lawmakers at the European Parliament already want to bring forward rules addressing key parts of the supervising body’s proposals.

A survey published by the ECB on Wednesday said that distributed-ledger technology is “barely used across banks,” with fewer than one in five seeking to apply the solutions, and that crypto activities and exposures are “insignificant.”

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

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 employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.