February 5, 2023

The European Parliament will consider a proposal to reserve 100% of crypto assets on the balance sheet of banks

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The European Parliament will consider a proposal to reserve 100% of crypto assets on the balance sheet of banks

The European Parliament's Committee on Economic and Monetary Affairs voted to impose strict restrictions on banks seeking to keep crypto assets on their balance sheets.

The decision repeats the rules of the Basel Committee onbanking supervision, which require that holdings of unsecured banking assets should receive the highest possible risk weight. The new norm, if approved by Parliament, will significantly tighten the existing reserve norms. The amendments will have a significant impact on the capital of banks, but they will not come as a surprise to the market, since financial institutions regularly face the consequences of the application of these measures during the reorganization and revocation of licenses.

The new restrictions equate those taken into account onon the balance sheets of banks, crypto-assets to promissory notes, collateral or fictitious lending to companies when the loan is classified as bad and requires 100% reservation.

“Banks will be required to reserve the euroequity for every euro held in cryptocurrency. Such prohibitive capital requirements will help prevent the spread of volatility in the crypto world to the financial system,” explained the economic representative of the European People’s Party, the largest political group in Parliament, Markus Ferber.

Association of European Financial Markets (AFME),a lobbying group representing traditional financial institutions such as investment banks expressed concern that the scope of the amendment could be too broad.

To become law, approved by the committee oneconomic and monetary issues, the bill must be approved by the European Parliament and be agreed with the ministers of national finance of the EU countries.

Earlier, the European Parliament moved
for April, the final consideration of the draft law on the regulation of cryptocurrencies in the European Union (MiCA).