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‘Prohibitive’ Capital Rules for Banks Holding Crypto Win Support in EU Parliament

News Feed - 2023-01-26 05:01:12

‘Prohibitive’ Capital Rules for Banks Holding Crypto Win Support in EU Parliament


Lawmakers in the European Union have backed legislation imposing new capital requirements for financial institutions, including strict rules meant to cover crypto-related risks. The latter concern banks keeping digital assets and are expected to enter into force in January, 2025. EU Legislators Approve Draft Law Implementing the Basel III Capital Regulations for Banks


Members of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) supported a bill on Tuesday designed to enforce the latest global bank capital rules. Reuters noted in a report that the lawmakers have also incorporated specific requirements addressing risks that stem from crypto assets.


The general rules are part of the Basel III reforms, a set of internationally agreed measures developed by the Basel Committee on Banking Supervision in the aftermath of the 2007-2009 financial crisis. Their main purpose is to strengthen the supervision and risk management of banks.


Other jurisdictions, including the U.S. and U.K., are also moving in a similar direction. However, ECON is introducing additional regulations with the European draft law, obliging banking institutions to hold enough capital to fully cover crypto asset holdings.


“Banks will be required to hold a euro of their own capital for every euro they hold in crypto,” explained Markus Ferber, a center-right member of the committee from Germany. He elaborated: Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system. ECON Takes Harder Line Than EU Member States


The changes, which are in line with the recommendations of global banking regulators, represent an interim measure pending further legislation. An earlier version of the bill was already approved by the member states and the European Parliament will have to negotiate the final draft with them.


The EU states have adopted a more accommodative approach to when foreign banks providing services to European customers should open a branch or transform one into a more capitalized subsidiary. The ECON members took a harder line, the report remarks.


Fine-tuning is to be expected. For example, the Association for Financial Markets in Europe (AFME) pointed out that the draft lacks a definition of crypto assets. The industry organization believes it could be applied to tokenized securities eventually.


The AFME also says that the EU should avoid a potential adverse impact of tightening access to international markets and cross-border services while it seeks to consolidate its autonomy in capital markets in the face of competition from the U.K., following Brexit.


Last summer, EU institutions and member states reached agreement on Europe’s new Markets in Crypto Assets (MiCA) legislation. The package is expected to enter into force in 2023 but businesses will have another 12 to 18 months to comply with it. Tags in this story Banking institutions, banks, capital regulations, capital requirements, capital rules, committee, Crypto, crypto assets, crypto regulations, Cryptocurrencies, Cryptocurrency, ECON, EU, EU Parliament, Europe, european, European Parliament, European Union, risks, rules


Do you think the European Parliament will adopt the stricter capital requirements for banks holding crypto assets? Share your expectations in the comments section below. Lubomir Tassev


Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration. China-backed Blockchain Project Proposes SWIFT Alternative for Stablecoins and CBDCs FINANCE | 3 days ago Silvergate Capital Incurs Loss of $1 Billion in Q4 of 2022 FINANCE | 6 days ago


Image Credits: Shutterstock, Pixabay, Wiki Commons, Alexandra Lande / Shutterstock.com Previous articleCentral African Republic Sets Up Committee Tasked With Drafting Crypto Bill Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItArgentinian Securities Regulator Launches Innovation Hub to Discuss Regulated Crypto Investments


The National Securities Commission (CNV), which is the Argentinian securities watchdog, recently launched an innovation hub with the goal of advancing conversations about cryptocurrency and fintech investments. This organization will serve as a link between private entities and the institution, ... read more.Privacy-Centric Monero Plans for July Hard Fork, Plans Include Ring Signature, Bulletproof Upgrade Fed"s Bullard Wants to Raise Bank Rate to 3.5% by Year"s End, Hints at 75 Basis Point Rate Hike Interest in Real Estate Investments in Spain Grew 400%, With Some Using Crypto and Stocks as Payment Method Survey: Adoption in Argentina Grows, With 12 out of 100 Adults Having Invested in Crypto

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