Draft EU Rules Will Force Banks to Give Cryptocurrencies Highest Risk Rating

MARKET_WATCH

Regulation

Under new draft EU rules, banks holding cryptocurrencies may soon be forced under law to assign the digital assets the highest possible risk rating.As per the published legal draft, banks would need to give all their crypto asset exposure a proposed risk weight of 1,250% until December 2024, meaning they will be forced to hold an equal amount of capital matching the crypto they hold.These rules are still set for parliamentary approval.Longer term, banks may need to conform to a larger set of new requirements laid out in a late December 2022 document from the Basel Committee on Banking Supervision (BCBS), which is set to come into play during January 2025.

 

According to the latest announcement from the EU, the Commission is set to adopt a legislative proposal by 31 December 2024 that would look to transpose elements of the BCBS standards into EU law in the long term.EU Lawmakers Pave Way for Stricter Crypto Rules for BanksThese upcoming changes to the capital and reporting requirements were confirmed to Decrypt by an EU spokesperson in January 2023, following Reuters first leaking news of the increased capital requirements. 

 

Capital requirements for cryptoThe capital requirements outlined in the Basel committee’s requirements are set to differ depending on the type of cryptoasset looked at.Well-known cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) would be considered to be Group 2 cryptoassets according to the documentation.Group 2 assets are then subdivided into two groups by the committee: Group A, which covers crypto holdings that are made via ETFs or other derivatives, which can be traded on regulated public markets, and Group B where this isn’t the case.Group 2 B assets will be given a proposed risk weight of 1,250%, whereas Group 2 A will be subject to lower requirements.

 

However other forms of crypto assets, such as tokenized versions of traditional assets like equities, some types of stablecoins which don’t rely on algorithms to maintain their price, and potential Central Bank Digital Currencies (CBDCs) would fall under lower capital requirements and are considered to be in Group 1.Vote on EU’s Landmark MiCA Crypto Bill Delayed AgainIn addition, under the new rules there will be strict limitations on the proportion of Type 2 crypto assets which banks will be able to hold on their balance books.A bank’s total exposure to Group 2 crypto assets must not exceed 2% of the bank’s capital and should generally be lower than 1%, according to the proposed rules.Commenting on the move, the EU Commission’s announcement highlighted how “recent adverse developments in the crypto-assets markets” have made mitigating the risk of crypto assets urgent, saying that “existing prudential rules are not designed to adequately capture the risks inherent to crypto-assets.” 

 

Source : [Draft EU Rules Will Force Banks to Give Cryptocurrencies Highest Risk Rating](finance.yahoo.com/news/draft-eu-rules-force-banks-134925149.html) undefined - Yahoo crypto / February 13, 2023

rayn.finance logo

Automata FRANCE SAS

240 rue Evariste Galois,

06410 Biot,

Sophia Antipolis

Automata Pay

65-66 Warwick House 4th

Floor, Queen Street, London

England, EC4R 1EB

Automata Pay Europe Ltd

3rd Floor Ormond Building,

31-36 Ormond Quay Upper,

Dublin 7, D07 Ee37

Automata ICO Ltd

Italian Branch

Via Archimede, 161,

00197 Roma

Italy

The purchase of digital assets is subject to a high market risk and price volatility. Changes in value can be significant and occur rapidly and without warning. Past performance is not a reliable indicator of future performance. The value of an investment and returns can fluctuate both up and down, and you may not recover the amount you invested. RISK WARNING

Automata ICO Limited has a branch in Italy with its registered office at Via Archimede, 161, Roma, Italy, and registered in Italy under number 96550860587 with the Organismo Agenti e Mediatori (OAM) as a Virtual Asset Service Provider (VASP).

Automata France SAS is a company registered in France with the company number 902 498 617. Automata FRANCE SAS is registered with the french Financial Market Authority, l’Autorité des marchés financiers (“AMF”), as a provider of Virtual Asset Service Provider under number E2023-087.

Automata Pay Europe Limited is a partner of Modulr Finance B.V., a company registered in the Netherlands with company number 81852401, which is authorised and regulated by the Dutch Central Bank (DNB) as an Electronic Money Institution (Firm Reference Number: R182870) for the issuance of electronic money and payment services. Your account and related payment services are provided by Modulr Finance B.V. Your funds will be held in one or more segregated accounts and safeguarded in line with the Financial Supervision Act. How we keep your money safe.