EU lawmakers seek to cap banks’ bitcoin holdings

08/17 14:30

European Union (EU) banks that are exposed to cryptocurrencies like bitcoin would face caps and hefty capital requirements under proposed amendments to a financial-services law published Wednesday. Under the plans, set out in a document dated Aug. 11, crypto assets like bitcoin, which are deemed unduly volatile or risky, and known collectively as class 2, would have the most cautious possible rating. In effect, this means they will be unable to lend based on their virtual asset holdings. “An institution’s total exposure to class 2 crypto-asset exposures must not be higher than 1% of the institution’s Tier 1 capital at all times,” said the proposal tabled by the Finnish Member of the European Parliament, imposing an absolute limit on how much bitcoin regulated lenders can hold. Tier 1 capital represents the highest-quality capital in a bank's reserves. Class 1 crypto assets, which are deemed less risky than class 2 and encompasses regulated stablecoins and securities that use distributed ledger technology, would get more flexible capital requirements and no cap.

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