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EU Lawmakers Approve Capital Rules for Cryptoassets

European Union lawmakers have approved a draft law implementing "prohibitive" capital requirements for crypto assets as part of the final leg of post-financial global bank capital rules.

Cryptocurrency in front of the European Union flag
Cryptocurrency in front of the European Union flag

EU Implements Basel III Capital Rules

The draft law, approved by the European Parliament's economic affairs committee, will implement Basel III capital rules starting January 2025. The committee also approved temporary divergences to give banks more time to adapt.

Banks Required to Cover Cryptoasset Risks

The draft law introduces new elements, including the requirement for banks to hold enough capital to cover their holdings of crypto assets fully. "Banks will be required to hold a euro of their capital for every euro they hold in crypto," said Markus Ferber, a center-right German committee member.

EU Takes Preventative Measures

The move, an interim measure pending further EU legislation, is in line with recommendations from global banking regulators. Ferber explained that "prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system."

Industry Body Expresses Concerns

The Association for Financial Markets in Europe (AFME), an industry body, has expressed concerns that the draft law contains no definition of crypto assets and could be applied to tokenized securities.

EU flag, gavel of justice and Bitcoin
EU flag, gavel of justice and Bitcoin

EU Negotiates Final Text

EU states have already approved their version of the draft law. Lawmakers will now negotiate a final text with member states, with further adjustments expected.

Foreign Banks Monitoring EU Talks

Foreign banks operating through branches in the EU will be closely monitoring the talks. EU states have taken a more accommodative approach to when foreign banks serving customers in the bloc should open a branch or convert a branch into a more heavily capitalized subsidiary. In contrast, EU lawmakers have taken a harder line.

EU Seeks "Strategic Autonomy" in Capital Markets

The EU is keen to build up "strategic autonomy" in capital markets as it faces competition from a financial center on its doorstep after Brexit. AFME has emphasized the importance of avoiding a "significant adverse impact" of tightening EU access to international markets and cross-border services.