The ECB steps in as banks dip their toes into the crypto pool

Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay

LONDON, Aug 17 (Reuters) – The European Central Bank (ECB) said on Wednesday it would harmonize how banks offer crypto assets to ensure they have enough capital and expertise in a sector some EU lawmakers have described as the Wild West.

Several crypto companies such as Binance and Crypto.com have been authorized in EU countries such as Italy, France, Spain, Greece or Germany after complying with national security measures to combat money laundering and terrorist financing.

This comes ahead of pan-EU licensing rules from 2023 at the earliest. Read more

The ECB said banks were also considering whether to get involved in the crypto sector, but that national rules differed quite a bit.

“In Germany, certain crypto activities are subject to a banking license requirement and to date several banks have requested permission to carry out these licensed activities,” the ECB said in a statement.

“It is in this context that the ECB is taking steps to harmonize the assessment of license requests.”

The ECB, which directly regulates top eurozone lenders such as Deutsche Bank, UniCredit and BNP Paribas, said it would examine whether crypto activities were in line with a bank’s risk “profile”, which determines how much capital to hold.

The ECB will also check whether a bank can identify and assess risks from crypto-assets and whether board members and IT staff have “robust experience” in the sector.

“Importantly, in close cooperation with national supervisors, the ECB will strive for greater consistency in supervisory assessments across national regimes,” the ECB added.

Global regulators at the Basel Committee in Switzerland are considering whether there should be specific capital buffers for holding crypto assets in banks.

The EU is also reviewing the law on bank capital requirements.

Ville Niinisto, a member of the Green Party of the European Parliament, has proposed an amendment that bank holdings of bitcoin and other non-asset-backed cryptocurrencies should not exceed 1% of a bank’s Common Equity Tier 1 capital target.

Such a cap would need the support of the entire parliament and EU states to become law, a lengthy process.

Niinisto has also suggested that regulators should consider whether there is a need for tailored capital requirements for blockchain, which underpins crypto assets.

Reporting by Huw Jones Editing by Mark Potter

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