The European Banking Authority (EBA) has finalized rules requiring banks to hold significantly more capital against so-called “unbacked” cryptocurrencies like Bitcoin and Ether.
In its final draft of regulatory technical standards released on Tuesday, the EBA said the rules aim to “address implementation aspects and will ensure harmonisation of the capital requirements on crypto-asset exposures by institutions across the EU.” The framework applies to European Union-based banks holding crypto assets on their balance sheets.
According to the accompanying documentation, digital assets in group 2 (a and b) are subject to “a general 1,250%” risk weight. Group 2b refers to “other” crypto assets, including unbacked ones such as Bitcoin (BTC). Group 2a refers to a subcategory of the same assets that meet the Bank for International Settlements’ hedging and netting criteria.
Group 1 b refers to so-called asset-referenced tokens tied to traditional financial instruments. This group is subject to a 250% risk weight.
Those risk weights were introduced as part of the Capital Requirements Regulation (CRR III) and took effect in July 2024.
The latest EBA draft adds the technical elements needed to calculate and aggregate crypto exposures, such as credit-risk, market-risk and counterparty-risk modeling. It also introduces strict separation between assets, meaning Bitcoin and Ether (ETH) cannot be offset against each other.
Once the final draft goes to the European Commission, Brussels will have up to three months to decide whether to endorse it as is or with amendments, or send it back for redrafting. After endorsement, the bill would become a delegated regulation and be forwarded to the European Parliament and the Council, with a three-month objection window extendable to six.
If neither the European Parliament nor the Council objects, the draft will come into effect within 20 days of its publication in the Official Journal of the EU.
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EBA finalizes strict crypto rules
The rules are expected to directly affect European banks already holding crypto on their balance sheets. Italian bank Intesa Sanpaolo, which bought 1 million euros worth of Bitcoin in January, would need to hold 12.5 million euros in capital against that position under the new framework.
Fintech firm Revolut is unlikely to be affected by the change. The bank’s…
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