Crypto regulation: EU on the verge of imposing new restrictions on banks

The European banking sector may witness new laws in the coming days. EU policymakers, who have never hidden their desire to regulate this sector, particularly banks’ access to cryptocurrencies, are taking a giant leap and could see their dream become a reality soon. Governments across the European Union are now all in favor of strict restrictions on bank capital, a decision that could directly impact two prominent cryptos.

New rules to oversee banks’ crypto activities

The European lawmakers’ distrust of cryptocurrencies displayed last year has prompted them to adopt new laws to better regulate the crypto industry and all its actors and institutions. Among these is the Markets in Crypto Assets Regulation (MiCA), a regulation that will officially come into effect in a few days and sets the standards for the operation of crypto firms.

European Union governments are also turning their attention to banks’ adoption of cryptos and are announcing the imminent introduction of new banking laws after several months of negotiations.

During a meeting held in Spain to discuss the new rules, Mats Anderson, adviser for services and financial markets at the Swedish Representation to the European Union, stated, “The Commission’s document is a good basis to move forward.” The Swedish diplomat ensures that the other 26 members are unanimous on this issue.

Martin Merlin, Director of Financial Markets at the European Commission, also affirms that with the progress made in the negotiations, an “agreement by the end of June is possible.” The adoption of the new banking laws is now closer than ever. However, what implications will this have for cryptos, which are at the heart of the discussions?

Maximal risk weighting for Bitcoin (BTC) and Ethereum (ETH) on the horizon?

With the new capital adequacy standards envisioned by EU governments, Bitcoin (BTC) and Ethereum (ETH) could receive the maximum risk weighting of 1250%. Banks that wish to expose themselves to cryptos will, therefore, have to meet very significant capital requirements.

The idea of applying the maximum risk weighting to these digital assets had already emerged in January and was a proposal put forward by the European Parliament. However, the European Commission has suggested easing these measures by introducing lower risk weightings for stablecoins regulated by the MiCA law.

European institutions are, therefore, reiterating their desire to regulate the relationship between the banking sector and the crypto industry. In fact, the European Parliament announced its plan to impose new restrictions on crypto payments just last March.