2022 has not been a good year for crypto investors. Events such as the bankruptcy of Terra (LUNA) and FTX on the one hand caused a loss to the investor and on the other hand undermined the confidence in the sector. Parallel to all these, regulation discussions began. The latest news has revealed that the European Union is about to implement an important regulation on cryptocurrencies.
The European Parliament (EP) Committee has approved an important regulation regarding banks allowing cryptocurrency-related transactions. This regulation imposes an important rule on banks that hold or allow cryptocurrency trading. The regulation, which will be opened to the approval of EU member states after being approved in the General Assembly, aims to protect investors.
The regulation imposes capital requirements on banks holding cryptocurrencies!
The regulation, approved by the European Parliament, imposes capital requirements on banks. Let’s say a bank has $1 billion in Bitcoin. According to the arrangement, the bank will allocate $1 billion in capital only for Bitcoin. Thus, the bank and its customers will be protected in case of possible shocks. In addition, banks will have to transparently disclose the amount of cryptocurrencies they hold and what crypto-related services they offer.
As a matter of fact, it is recommended that each bank allocates 1250 percent of its cryptocurrency as capital. However, AP has considered 100 percent of the capital amount to be a reasonable level. If the European Union countries accept the regulation and take it into effect, banks will start to allocate capital up to the amount of crypto money as of 2025. If the regulation goes into effect, it will be covered by Basel III, an internationally agreed upon agreement after the 2008 crisis.
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