Bitcoin News Today: EBA Slaps 1,250% Capital Requirement on Unbacked Cryptocurrencies

The European Banking Authority (EBA) has finalized a set of capital requirements for European banks holding unbacked cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) [1]. The rules, part of the Capital Requirements Regulation (CRR III), will require banks to hold significantly more capital against these volatile digital assets. The final regulatory technical standards were released on Tuesday, outlining a harmonized framework across the EU to manage crypto-asset exposures [1].

According to the EBA’s documentation, unbacked cryptocurrencies fall under Group 2b, which is subject to a 1,250% risk weight. This is significantly higher than the 250% risk weight applied to Group 1b, which includes asset-referenced tokens linked to traditional financial instruments [1]. The distinction is designed to reflect the higher volatility and risk associated with unbacked crypto assets. The framework also mandates strict separation between different crypto assets, meaning that Bitcoin and Ether cannot be offset against each other in capital calculations [1].

The EBA’s final draft includes technical guidance on how to calculate and aggregate crypto exposures, covering credit, market, and counterparty risks. These measures aim to ensure consistency and transparency in how EU-based banks treat crypto assets on their balance sheets [1]. The rules will become effective after a formal endorsement process by the European Commission, followed by a three-month objection period from the European Parliament and the Council, with an option to extend it by another three months [1].

For banks already holding crypto assets, the implications are immediate. For example, Intesa Sanpaolo, which purchased 1 million euros worth of Bitcoin in January, would be required to hold 12.5 million euros in capital to support that position under the new regime [1]. Fintechs like Revolut, which operate crypto services off-balance-sheet, are less likely to be directly affected [1].

The EBA’s approach diverges from regulatory trends in other parts of the world, where authorities are increasingly integrating crypto into the traditional financial system. In the U.S., the Federal Deposit Insurance Corporation (FDIC) recently indicated that banks can engage in crypto-related activities without prior approval [1]. Similarly, Switzerland has updated its DLT Act to allow banks to custody tokenized securities and provide guarantees for stablecoin issuers [1].

The European rules may slow the pace of digital asset adoption among EU banks, especially as decentralized finance and tokenization continue to evolve. Meanwhile, U.S. banks, including JPMorgan Chase, are reportedly exploring crypto-backed lending, signaling a different regulatory and strategic direction [1].

Source: [1] European Banking Authority Crypto Capital Rules (https://cointelegraph.com/news/european-banking-authority-crypto-capital-rules?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound)