EU calls for swift crypto capital rules for banks – Business
Business
Banks have modest exposures to cryptoassets, limited involvement in providing services, European Commission
LONDON (Reuters) – If Europe wants to meet an internationally agreed date, strict capital requirements for banks holding cryptoassets must be slotted into the upcoming EU banking law, according to the bloc’s leadership.
The implementation of capital requirements for banks’ exposures to crypto-assets such as Stablecoins and Bitcoin has a deadline of January 2025 set by the worldwide Basel Committee of banking regulators from the major financial centers of the world.
In an informal discussion paper reviewed by Reuters, the European Commission stated that “banks currently have extremely modest exposures to cryptoassets and only a limited involvement in providing cryptoasset-related services.”
Banks have shown interest in trading cryptocurrencies on behalf of their customers and in offering services related to cryptocurrencies.
Legislation in the European Union implements the Basel criteria, and if that law is delayed, banks may have to wait longer to enter the cryptocurrency market when new EU regulations for trading in crypto assets come into effect in 2024.
The EU can either propose a new law or, as the European Parliament is asking, amend the banking bill it is currently finalizing to implement Basel’s crypto regulations.
The measures on crypto-assets could be included in the final version of the banking law, which is currently being negotiated by parliament and EU states, according to the report.
According to the commission’s document, this will give banks clarity on their need for exposures to crypto assets and guarantee that risks associated with them are effectively managed.
From a global point of view, it will also enable the EU to perfectly adapt to the timetable for implementation at the Basel level.
The earliest a separate draft law will be published is at the end of 2023, according to the article. The parliamentary elections in mid-2024 make it more challenging to pass a new law by 2025.
The Commission’s document also recommends that in order to verify that crypto-assets are correctly classified, the European Banking Authority (EBA) in the EU can cooperate with the EU’s securities watchdog ESMA.
Basel has established punitive capital charges for cryptocurrencies such as Bitcoin that are not backed, and less restrictive capital charges for Stablecoins that are backed by assets or fiat money.
The study suggested that it could be beneficial to require ESMA and EBA to keep an overview of the various categories into which crypto-assets are currently categorized.
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