The European Union continues to work day by day on crypto regulation. This past week, the Economic Affairs Committee approved the project that obliges banks to back their crypto holdings with fiduciary capital. Following this approval, the bill will now go to the European Parliament.
The European Union plans to impose strict capital requirements on banks holding cryptocurrencies. To this end, the legislators propose that all banks back their cryptocurrency holdings in euros.
Markus Ferber, an economic spokesman for the European People's Party, explained more details about the main requirement. According to Ferber, all banks must hold one euro of their own capital for every euro they have in cryptocurrencies.
Ferber also stated that the crypto world is still volatile. With a proposal like this, they could prevent this instability from spilling over into the financial system.
The initiative will come into reason as of January 2025. This would allow banking institutions more time to adapt to the new regulations. Although some time is still available, there will be several temporary divergences.
However, some things could be improved in the proposal. For the Association for Financial Markets in Europe, the proposal needs to define crypto assets. Such a definition is necessary to know what kind of assets would be subject to regulation.
If they don't define it, they could apply the same law to tokenized securities even if they serve another function.
Although the draft has already been approved by the European Parliament's Committee on Economic and Monetary Affairs, there is still some way to go. The European Parliament must discuss it with the various finance ministers and await their approval.