EBA’s New Rules May Impact Bitcoin Holdings for EU Banks with 1,250% Risk Weight Requirement
Main Idea
The European Banking Authority (EBA) has introduced strict capital requirements for EU banks holding unbacked cryptocurrencies like Bitcoin and Ether, imposing a 1,250% risk weight, which contrasts with global trends towards crypto integration.
Key Points
1. The EBA mandates a 1,250% risk weight for unbacked cryptocurrencies, significantly increasing capital requirements for EU banks.
2. Asset-referenced tokens are subject to a 250% risk weight, while unbacked cryptocurrencies like Bitcoin and Ether cannot offset each other.
3. The rules are part of the Capital Requirements Regulation (CRR III) and took effect in July 2024, requiring banks to hold more capital against crypto exposures.
4. The EBA's approach diverges from global regulators, such as the FDIC and Switzerland, which are moving towards greater crypto integration in traditional finance.
5. Banks like Intesa Sanpaolo would need to hold 12.5 million euros in capital for 1 million euros worth of Bitcoin, while fintech firms like Revolut remain unaffected due to off-balance-sheet crypto services.
Description
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