EU Governments Friendly to Tough Crypto Bank-Capital Restrictions, Negotiator Says

The move could mean assets such as bitcoin (BTC) and ether (ETH) are given the maximum possible risk weight as part of a lengthy set of banking laws, which could be agreed as soon as next week.

AccessTimeIconJun 9, 2023 at 10:38 a.m. UTC
Updated Jun 13, 2023 at 3:08 p.m. UTC

European Union governments appear to support new bank-capital standards, which could see unbacked crypto treated as the riskiest kind of asset for lenders to hold, according to an official leading talks on new legislation.

The move could mean assets such as bitcoin (BTC) and ether (ETH) are given the maximum possible risk weight as part of a lengthy set of banking laws, which could be agreed as soon as next week.

It’s already known that the European Parliament favors what one lawmaker has called “prohibitive” measures to isolate crypto from the banking system, and now the EU’s Council – an arm of the legislature representing member states that would also need to agree the plans – appears amenable too.

“We find the commission paper a good basis to move forward,” said Mats Anderson, a Swedish diplomat, at an event in Spain to discuss the new rules. Anderson is the counsellor for financial services and markets at the EU representation of Sweden, which is currently chairing talks as the Council’s Presidency, and said his remarks were based on discussions with the bloc’s other 26 members.

Anderson then added that his reference to a European Commission paper had been a “Freudian slip,” after being gently rebuked for appearing to confirm the existence of a document that has never been officially published.

In January, the European Parliament proposed to give crypto assets like bitcoin the maximum possible 1,250 percent risk weight, meaning lenders would have to hold a euro of capital for each euro of crypto issued – a conservative approach, which some traditional-finance lobbyists have warned could impede deal-making.

In a secret document seen by CoinDesk, the commission then proposed to ease that somewhat by allowing lower risk weights for stablecoins regulated under a separate law known as MiCA, which takes effect in 2024. That’s seen as a transitional measure until standards from the international Basel Committee on Banking Supervision are finalized.

The banking package has proved thorny, and includes controversial non-crypto topics such as how to assess the risk of corporate loans and how to treat foreign lenders entering the bloc. But after more than 18 months of talks, officials now appear to feel a deal is imminent.

Progress with talks "makes me hopeful that we can strike an agreement at least by the end of June,” said commission official Martin Merlin, a director at the EU executive’s financial-services arm, while Anderson appeared to suggest a political deal may even be possible at a meeting scheduled for June 15.

Edited by Sandali Handagama.


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Jack Schickler

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