The European Union has agreed to new regulations for crypto assets as part of changes to the Capital Requirements Regulation and Directive.
The move was prompted by concerns about unbacked cryptocurrencies infiltrating the traditional financial system. The agreement was announced via a tweet from the European Parliament’s Economic and Monetary Affairs committee after a meeting that brought together representatives from the European Parliament, national governments, and the European Commission.
The new rules aim to strengthen and make banks operating in the EU more resilient. Preliminary details suggested a hardline stance with a maximum possible 1,250% risk weight assigned to free-floating cryptocurrencies, but a softer stance was proposed for regulated stablecoins and gained favour among EU governments.
The final version of the text is pending approval from member states and lawmakers, and transitional provisions will be in effect until January 2025. The objective is to mitigate potential risks faced by institutions due to their exposure to crypto-assets, which are not adequately addressed by the existing prudential framework.
The committee suggested that a bank’s exposure to certain crypto assets should not exceed 2% and should generally be lower than 1%.