Pending EU Banking Law Calls For Fast-Track Crypto Capital Rules For Banks

Strict capital rules for banks holding crypto-assets must be accelerated in the European Union’s pending banking law if Europe is to avoid missing a globally agreed deadline, the bloc’s executive said.

The Basel Global Committee of Banking Regulators of the world’s major financial centers has set January 2025 as the deadline for implementing capital requirements for banks’ exposures to crypto-assets such as stablecoins and bitcoins.

“At the moment, banks have very low exposure to crypto-assets and limited involvement in the provision of crypto-asset related services,” the European Commission said in an informal working document seen by Reuters.

“Banks have expressed interest in trading crypto-assets on behalf of their clients and providing crypto-asset-related services.”

The Basel standards are enforced in the EU with law, and a delay could mean banks have to wait longer to enter the cryptomarket, as separate EU rules for crypto-asset trading come into force in 2024.

To enforce the Basel crypto rules, the EU could either propose a new law or extend the banking law it is finalizing, as requested by the European Parliament.

Parliament and EU states have a say in the banking law and should start negotiating the final text, which could include provisions on crypto-assets, according to the newspaper.

This would give banks clarity on their requirements for exposure to crypto-assets and ensure that the resulting risks are properly accounted for, according to the Commission’s document.

“From an international perspective, this would also allow the EU to fully align with the implementation timeline agreed at Basel level.”

A separate bill will not be introduced until the end of 2023 at the earliest, according to the newspaper. Parliament goes to the polls in mid-2024, making it more difficult to approve a new law in time for 2025.

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

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

It could also be useful to mandate the EBA, in cooperation with ESMA, to maintain a list of how existing crypto-assets are classified, according to the document.

© Thomson Reuters 2023