Blockade against unsecured cryptos: The EU protects its banks

Making European banks more resistant to crises and less permeable to unsecured cryptocurrencies was the aim of lawmakers from the 27-nation bloc meeting today. At the same time, an agreement was reached in favor of reforms to banking regulations.

Europe speeds up crypto regulation

It will take until 2024 for the MiCA regulation to become effective. For the time being, we are only at the adoption and promulgation stages. Nevertheless, these few weeks have seen the proposal of a MiCA 2.0, more suitable for conglomerates.

Il faudra attendre jusqu’en 2024 pour que le règlement MiCA devienne effectif. Pour le moment, nous ne sommes qu’aux stades de l’adoption et de la promulgation. N’empêche que ces quelques semaines de mise au monde ont vu la proposition d’une MiCA 2.0, plus convenable aux conglomérats.

On Tuesday 27/06 @EP_Economics negotiators struck a deal
on changes to Capital Requirements Regulation & Directive #CRR & #CRD @jonasfernandez w/ #EU2023SE details will follow pic.twitter.com/7eRCgk7Eg5

— ECON Committee Press (@EP_Economics) June 27, 2023

The press release issued by the European Parliament referred to an agreement finalizing “reforms to banking rules”. Concocted by negotiators from the EU Parliament, Council and Commission, it targets amendments to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD).

“The negotiators’ goal was to implement the Basel III standards as closely as possible to European legislation. At the same time, the texts adopted take into account the concrete conditions of the EU banking sector by introducing certain European specificities, if possible on a transitional basis.”

According to CoinDesk, these revisions also affect crypto-assets. Legislators have in fact called for the introduction of “prohibitive” rules. They aim to block the integration of unsecured cryptocurrencies into the traditional financial system.

Adopting a hard line

The goal of increasing the strength and resilience of EU banks will only be achieved by adjusting the risk weighting for banking assets (such as cryptos and corporate loans), stresses Elisabeth Svantesson, Sweden’s Finance Minister.

In a recent negotiation of the players, a rather “hard” position was mentioned. It requires a maximum possible risk weighting of 1,250% to volatile cryptocurrencies.

In other words, banks will be obliged to issue one euro of capital for every euro of bitcoin or ether held. If this regulation is adopted, these institutions will no longer have an incentive to buy BTC or ETH.

And in the end, Europe will be devoid of all forms of crypto-assets devoid of stability. Only stablecoins will take pride of place alongside the digital euro so cherished by the ECB. But these currencies will have to pass stress tests if the Basel Committee’s security measures are to be taken into account.