EU lawmakers voted in favor of new rules that would require banks to hold capital buffers equal to the full value of their cryptocurrency assets. This means that if a bank has $10 million in cryptocurrency, for example, it would also need to have $10 million in reserves. These new rules should come into force in January 2025.
These regulations are put in place to protect against potential investment losses in cryptocurrencies, as the value of these assets can be highly volatile. However, according to the Association for Financial Markets in Europe (AFME), an industry body, the bill does not offer a clear definition of crypto assets and could end up applying to tokenized securities as well. In addition, AFME officials quoted by Reuters expressed concern about a potentially significant adverse impact of tightening the EU's access to international markets and cross-border services.
The new regulations are in line with the recommendations of global banking regulators, such as the Basel Committee on Banking Supervision, which has called for stricter supervision of the use of cryptocurrencies by financial institutions. According to Reuters, EU states have already approved their version of the bill, and lawmakers must now negotiate a final text with member states, which could result in further amendments.
To be specific, to become law, the proposed measures require the approval of the European Parliament and must be negotiated with national finance ministers who meet in the Council of the European Union as part of a more comprehensive package of bank capital reforms.
The European Union keeps a close eye on privacy coins
In November 2022, the European Union considered issuing a ban that would prevent banks from dealing with privacy coins. Cryptocurrencies that aim to improve user privacy and support anonymous means of payment could be banned as a result of new European AML rules according to a draft money laundering bill by Czech officials that ended in CoinDesk.
The document stated that credit institutions, financial institutions, and crypto asset service providers would be affected by the new rules. According to EU officials, the new measures would attempt to minimize the risks posed by crypto assets specifically designed to avoid traceability. Examples of such privacy coins include zcash, monero, and dash. To become law, the bill must be approved by both the Council and the European Parliament.
