EU Banks Must Now Hold More Capital for Crypto Losses: New Rules Agreed

• European Union lawmakers have agreed to stricter new requirements for banks dealing with crypto and digital assets.
• The new rules will require banks to hold more capital to protect customers against crypto losses, as well as disclose their crypto exposures.
• The new measures are part of the Basel III International Regulatory Framework, which is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision.

The European Union recently took a major step towards better regulating the cryptocurrency market by introducing stricter new requirements for banks dealing with digital assets. This measure was taken to limit the number of unbacked loans with Bitcoin (BTC) and Ethereum (ETH) that lenders could hold in front of the European Commission.

The European Parliament’s Economic and Monetary Affairs Committee has voted on the matter that will put these restrictions in place. Cross-party compromises will require banks to hold more capital to protect customers against crypto losses. This amendment means that when the rules come into effect, banks must apply a risk-weighting of 1,250% to crypto-asset exposures.

The new rules will need approval from the European Parliament and the EU Finance Ministers for this measure to become law. The proposed amendment also includes a requirement for the banks to disclose if and how they are exposed to cryptocurrencies.

The new measures are part of the Basel III International Regulatory Framework, which is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision. This Basel III component strengthens the financial framework by agreeing to solid capital requirements. The Basel III framework also includes the Capital Requirements Directive, the Market Risk Directive, and the Solvency II Directive.

The new rules have been welcomed by the crypto community as a major step forward in the world of digital assets. The rules will create more trust and stability in the market, allowing banks to safely interact with digital assets without fear of losing capital. This will also enable banks to differentiate between legitimate and fraudulent activities, as well as facilitate the development of a more transparent and well-regulated digital asset market.

In conclusion, the new rules proposed by the European Union are a major step forward in the world of digital assets. They will help to create more trust and stability in the market, allowing banks to safely interact with digital assets without fear of losing capital. These rules will also enable banks to differentiate between legitimate and fraudulent activities, as well as facilitate the development of a more transparent and well-regulated digital asset market.