EU Lawmakers Approve Sweeping New Crypto Regulations for Banks

Lawmakers recently voted on and approved a bundle of changes which will impose steep new requirements on banks that have business dealings in crypto. the association for financial markets in europe (afme) welcomed the committee’s vote, although they are concerned that tokenized securities could be hit by the regulations if the wording is not clarified. the new rules were first brought forward by finnish mep ville niinisto in 2021.

Vote was part of efforts to bring european rules in line with standards suggested by the basel committee on banking supervision last year, and is set to be implemented by the start of 2025. the final text for the changes approved by the eu parliament’s economics committee has not yet been published, and the parliament, the council and the commission will agree on the final text of a law in the trilogue process.

Changes will require banks to disclose any exposure to cryptocurrencies, and to apply a risk-weighting of 1,250% on crypto. the amendments also stated that crypto whose value is based on a reference asset should be subject to the same risk weights as the reference asset, and unbacked crypto would receive the 1,250% risk-weighting. the draft also limited an institution’s total exposure to unbacked crypto asset to no more than 1% of its tier 1 capital. the new rules were proposed in order to protect banks from the risks associated with cryptocurrencies, and to ensure a level playing field for all financial institutions.

By Evey Lovelace

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