Recently, a significant development has emerged in the cryptocurrency space. The European Union (EU) announced a political agreement on new bank capital legislation aimed at regulating cryptocurrencies and addressing the risks associated with them. The agreement was reached after a meeting between representatives of the European Parliament, national governments and the European Commission. The legislation aims to introduce strict rules to prevent unsupported cryptocurrencies from infiltrating the traditional financial system.
Significant deal for cryptocurrency rules in Europe
The new rules were first proposed by the European Commission in 2021. It has since undergone careful consideration and changes. The agreement also covers controversial changes in how banks assess the risk associated with corporate and home loans. However, before the legislation becomes law, it must be voted on by the member states in the European Council. It also needs to be approved by lawmakers, which can be a long process.
The Basel Committee on Banking Supervision is working to finalize a global crypto banking rulebook. Meanwhile, early indications point to a tough approach. The proposed rules assign a risk weight of up to 1,250 percent to free-floating cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). This requires banks to hold capital equivalent to the value of the cryptocurrencies they hold. As a result, these stringent requirements; It does not provide much incentive for banks to enter the crypto market. However, members of the European Parliament want these measures to be implemented quickly.
However, a compromise proposal made by the European Commission during the negotiations attracted attention. Because this proposal offers some tolerance for regulated stablecoins. As we have also reported as Kriptokoin.com, stablecoins are cryptocurrencies that are pegged to traditional assets to maintain stability. The proposal has also received support from EU governments, which must pass the bill before it becomes law.
What does the EU’s move mean?
The EU’s move to regulate cryptocurrencies seems critical. It stems from concerns about potential risks to financial stability and the need to protect consumers and investors. By enforcing strict capital requirements, the EU aims to ensure that banks are adequately prepared to withstand the potential losses associated with cryptocurrencies. In addition, by addressing the risk assessment methodologies used by banks for corporate and housing loans, the legislation aims to increase the overall stability of the banking sector.
While details of the new legislation have yet to be made public, this political agreement represents an important step towards greater regulation of cryptocurrencies within the EU. In the coming months, member states and legislators in the European Council will vote on the legislation. This process will reveal the final form of the regulations, taking into account various perspectives and possible changes.
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