A draft law published by the European Parliament will see European Union (EU) banks placing the maximum possible risk weighting on crypto assets.
Under the planned rules, banks would need to disclose their direct and indirect exposure to crypto, while the European Commission prepares more detailed rules for the crypto sector.
The risk weight proposed is 1250% which would see banks have to hold capital to match the amount of crypto they hold to mitigate the risks.
Explanatory text by the parliament’s Economic and Monetary Affairs Committee said: “The potentially increasing involvement of [financial] institutions in crypto-assets related activities should be thoroughly reflected in the Union prudential framework, in order to adequately mitigate the risks of these instruments for the institutions’ financial stability.
“This is even more urgent in light of the recent adverse developments in the crypto-assets markets.”
The draft law seeks the European Commission to propose further regulations by June to implement international capital standards set by the Basel Committee on Banking Supervision.
The Committee has proposed imposing a hard cap on banks’ holdings of unbacked crypto such as Bitcoin, a suggestion which does not yet appear in the EU’s legal draft.
Before passing into law, the EU member governments meeting as the Council and the parliament must agree on the proposals.
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