Bitcoin News Today: EBA Finalizes 1,250% Capital Rule for Banks Holding Bitcoin Ether

The European Banking Authority (EBA) has finalized capital rules for banks holding unbacked cryptocurrencies such as Bitcoin and Ether, marking a major regulatory development in the EU’s approach to digital assets [1]. The new framework, part of the Capital Requirements Regulation (CRR III) that came into effect in July 2024, mandates significantly higher capital requirements for institutions holding these assets on their balance sheets.

Under the finalized regulatory technical standards, unbacked cryptocurrencies fall under Group 2b and are subject to a general 1,250% risk weight. Group 2a includes a subset of the same assets that meet specific hedging and netting criteria set by the Bank for International Settlements. Meanwhile, asset-referenced tokens in Group 1b, which are tied to traditional financial instruments, face a 250% risk weight. The rules aim to harmonize capital requirements across EU member states and ensure consistent risk management practices [1].

The EBA’s guidelines also include technical elements for modeling credit risk, market risk, and counterparty risk associated with crypto exposures. Notably, the framework requires a strict separation of crypto assets, meaning that Bitcoin and Ether cannot be offset against each other for capital purposes [1]. The rules are now set to be submitted to the European Commission, which has up to three months to endorse, amend, or reject the proposal. If approved, the regulation will be published in the Official Journal of the EU and become effective within 20 days unless objections are raised by the European Parliament or Council [1].

The impact of the new rules is expected to be significant for European banks with existing crypto holdings. For example, Intesa Sanpaolo, which purchased 1 million euros worth of Bitcoin in January, would now need to set aside 12.5 million euros in capital for that position [1]. On the other hand, fintech firms such as Revolut, whose crypto services operate off-balance-sheet, are unlikely to face immediate regulatory pressure under the new framework [1].

The EBA’s approach contrasts with regulatory trends in other parts of the world, where authorities are increasingly integrating cryptocurrencies into traditional financial systems. In the United States, the FDIC recently announced that banks may engage in crypto activities without prior approval, while Switzerland has updated its legal framework to allow banks to custody tokenized securities and offer guarantees for stablecoins [1]. Reports also suggest that the incoming U.S. administration is considering an executive order to investigate claims of “debanking” by crypto companies, signaling a potential shift in how U.S. regulators view the sector [1].

As the global financial landscape evolves, the EBA’s decision may limit EU banks’ participation in the expanding digital asset market, particularly in areas such as decentralized finance and tokenization. While the rules aim to enhance risk management, they also reflect a more cautious regulatory stance compared to other jurisdictions where crypto innovation is being actively supported [1].

Source: [1] EU banking regulator finalizes capital rules for banks holding Bitcoin, Ether (https://coinmarketcap.com/community/articles/6894a59dab27187a281f7b13/)