Until December 2024, EU authorities require banks to keep 100% capital reserves for any crypto exposure.
New EU Banking Regulation Assigns Cryptocurrency the Highest Risk Score EU senators to propose in a new banking bill draught that, until December 2024, banks give cryptocurrency the maximum risk weight of 1,250%.
EU banks must also report the business activities and risk frameworks associated with any cryptocurrency exposure.
According to the proposal, banks must also maintain minimum capital reserves proportional to the risks associated with each crypto exposure. Until December 2024, they must maintain 100% capital requirements for all crypto exposures.
The greater risk ranking for crypto is consistent with the Basel Committee for Banking Supervision’s Basel III rules for risk-weighted assets. Banks are required to maintain capital in accordance with the greater amount derived from internal and standardized risk assessments. The rating of 1,250% is the maximum needed capital for certain risk-weighted assets under the standardized risk framework.
The EU’s Council and Parliament must vote on the proposed legislation for it to be enacted in all EU member states.
The new version of banking law piggybacks on the impending Markets-in-Crypto Assets legislation, which is slated to be voted on at the end of April 2023 in the European Parliament.
The new legislation governs the issue and trade of digital assets and mandates that miners report their energy use. New crypto ventures will be required to outline their dangers in an obligatory white paper.
The new laws were completed by lawmakers in October 2022, but the task of translating the text into the 24 languages of the EU union delayed its distribution.
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