EU Secures Historic Deal: Reinforcing Banks, Regulating Crypto

On Tuesday, the European Union (EU) reached a consensus on new bank-capital legislation, including regulations for crypto assets, in an effort to prevent unbacked cryptocurrencies from entering the traditional financial system.

The European Parliament’s Economic and Monetary Affairs committee made the announcement via a tweet. The agreement was reached after a meeting involving representatives from the European Parliament, national governments, and the European Commission, which initially proposed these regulations in 2021.

On Tuesday 27/06 @EP_Economics negotiators struck a deal
on changes to Capital Requirements Regulation & Directive #CRR & #CRD @jonasfernandez w/ #EU2023SE details will follow pic.twitter.com/7eRCgk7Eg5

— ECON Committee Press (@EP_Economics) June 27, 2023

To become legislation, the political deal must now undergo voting by member states in the EU’s Council and lawmakers, which could take several months.

The new rules introduce significant and contentious changes to how banks assess the risk of corporate and home loans and enhance the strength and resilience of banks operating in the European Union. Swedish Finance Minister Elisabeth Svantesson, who chaired the talks on behalf of EU member states, highlighted this in a statement.

The Council’s statement confirmed that the deal encompasses a “transitional prudential regime for crypto assets,” although specific details were not provided. The Basel Committee on Banking Supervision, an international standard-setting body, is finalizing a global crypto-banking rulebook.

Preliminary information suggests that they will adopt a strict approach, assigning a maximum risk weight of 1,250% to free-floating cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). Consequently, banks would need to allocate one euro of capital for each euro of bitcoin or ether they possess, reducing their incentive to invest in the market. EU parliamentarians are eager to implement these measures promptly.

During the negotiations, the European Commission proposed a compromise to slightly alleviate the stringent stance for regulated stablecoins. This proposal seems to have gained support among EU governments, who must also agree before the bill can be enacted.

Author

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.