European Banks Face Stricter Capital Requirements for Unbacked Cryptocurrencies
According to Cointelegraph, the European Banking Authority (EBA) has finalized new regulations requiring banks within the European Union to hold significantly more capital against unbacked cryptocurrencies such as Bitcoin and Ether. The EBA's final draft of regulatory technical standards, released on Tuesday, aims to harmonize capital requirements for crypto-asset exposures across EU-based banks. This framework applies to banks holding digital assets on their balance sheets, with specific risk weights assigned to different asset groups.
The documentation accompanying the draft outlines that digital assets in group 2, which includes unbacked cryptocurrencies like Bitcoin, are subject to a general risk weight of 1,250%. Group 2a refers to a subcategory of these assets that meet the Bank for International Settlements’ hedging and netting criteria, while group 1b includes asset-referenced tokens tied to traditional financial instruments, subject to a 250% risk weight. These risk weights were introduced as part of the Capital Requirements Regulation (CRR III) and have been in effect since July 2024.
The EBA's latest draft adds technical elements necessary for calculating and aggregating crypto exposures, including credit-risk, market-risk, and counterparty-risk modeling. It also mandates strict separation between assets, preventing Bitcoin and Ether from being offset against each other. Once the final draft is submitted to the European Commission, Brussels will have up to three months to decide whether to endorse it, amend it, or send it back for redrafting. If endorsed, the bill will become a delegated regulation and be forwarded to the European Parliament and the Council, with a three-month objection window extendable to six months. If no objections are raised, the draft will come into effect within 20 days of its publication in the Official Journal of the EU.
These rules are expected to impact European banks already holding crypto on their balance sheets. For instance, Italian bank Intesa Sanpaolo, which acquired 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. However, fintech firm Revolut is unlikely to be affected, as its crypto services are managed off-balance-sheet by its non-banking arm, Revolut Digital Assets Europe Ltd.
The EBA's stance contrasts with the broader global regulatory trend of integrating crypto within existing financial frameworks. In March, the Federal Deposit Insurance Corporation (FDIC) announced that institutions under its oversight could engage in crypto-related activities without prior approval. Similarly, Switzerland amended its DLT Act in April, allowing banks to custody tokenized securities and offer guarantees for stablecoin issuers under a clear legal framework. Recent reports suggest U.S. President Donald Trump is considering an executive order directing banking regulators to investigate claims of debanking made by the cryptocurrency sector and conservatives. Meanwhile, JPMorgan Chase is reportedly exploring crypto-backed loans, indicating a potential shift in how U.S. banks view crypto assets. The new EU capital rules could limit bank participation in the expanding digital asset market, especially as decentralized finance and tokenization continue to integrate into mainstream financial services.
