The EU calls for quick rules on crypto capital for banks

LONDON, Feb 20 (Reuters) – Tough capital rules for banks holding cryptoassets must be followed up in the EU’s pending banking law if Europe is to avoid missing a globally agreed deadline, the bloc’s leader has said.

The global Basel Committee of banking regulators from the world’s main financial centers has set a January 2025 deadline to implement capital requirements for banks’ exposures to crypto assets such as stablecoins and bitcoin.

“Currently, banks have very low exposures to cryptoassets and only a limited engagement in providing cryptoasset-related services,” the European Commission said in an informal discussion document seen by Reuters.

“Banks have expressed interest in trading cryptoassets on behalf of their clients and in offering cryptoasset-related services.”

Basel’s standards are applied in the EU by law, and a delay could mean banks have to wait longer to enter the crypto market as separate EU rules for trading in crypto assets come into force in 2024.

To enforce Basel’s crypto rules, the EU can either propose a new law, or extend the banking law it is currently finalizing, as the EU Parliament has requested.

Parliament and EU states have agreed on the banking law and will start negotiating the final text, which could include the provisions on crypto-assets, the newspaper said.

This will give banks clarity in their requirements for exposures to crypto-assets and will ensure that risks arising from these are adequately addressed, the commission’s paper states.

“From an international perspective, it will also allow the EU to fully align with the implementation deadline agreed at the Basel level.”

A separate draft law will not come until the end of 2023 at the earliest, the newspaper said. Parliament goes to elections in mid-2024, making it more difficult to approve a new law by 2025.

The commission’s paper also suggests that the bloc’s European Banking Authority (EBA) could coordinate with EU securities watchdog ESMA to ensure crypto assets are properly categorized.

Basel has imposed punitive capital charges on unbacked cryptocurrencies such as bitcoin, and less conservative charges on stablecoins, which are backed by an asset or fiat currency.

It may also be useful to give the EBA a mandate, in cooperation with ESMA, to maintain a list of how existing cryptoassets are categorized, the paper says.

Reporting by Huw Jones, editing by Louise Heavens

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