The European Union (EU) has reportedly reached a political agreement on new bank-capital laws, designed to keep unbacked cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH), out of the traditional financial system. The news, disclosed by the European Parliament’s Economic and Monetary Affairs committee, came after talks between representatives of the European Parliament, national governments, and the European Commission. This new legislation, first proposed back in 2021, requires approval from EU member states and lawmakers before becoming official. This process, however, can take several months.
Critics argue that the proposed rules might be too stringent, potentially stifling the growth of the cryptocurrency market. Supporters, conversely, believe that these regulations are necessary for maintaining the integrity and stability of the traditional financial system.
Despite any controversy, worldwide banking authorities are currently working on global crypto banking regulations. The Basel Committee on Banking Supervision, an international standard-setter, is presently finalizing a rulebook. The preliminary drafts suggest a challenging approach, assigning a maximum possible 1,250% risk weight to free-floating cryptocurrencies. Consequently, banks would have to issue a euro of capital for each euro of BTC or ETH they hold, significantly diminishing any incentive for them to enter the market. EU parliamentarians are reportedly eager to implement these rules sooner rather than later.
While the stringent requirements could lead to reduced innovation and market participation, some believe it can minimize the potential risks associated with the unregulated digital asset market. The guidelines might also enable the EU to maintain its reputation as a secure and reliable financial hub.
During the negotiations, the European Commission proposed to ease the strict rules for regulated stablecoins. This softened stance seems to have gained support from EU governments, whose agreement is necessary for the bill to become law.
In conclusion, the proposed EU bank-capital legislation takes a firm stand on unbacked cryptocurrencies while offering concessions for regulated stablecoins. While skeptics argue that the rules may stifle the industry’s growth, proponents believe that such regulations are crucial for safeguarding the traditional financial system. The final verdict on this issue will be determined as the legislation navigates the necessary political and legislative processes, shaping the future of both cryptocurrencies and EU financial regulation.
Source: Coindesk
