European Parliament Votes to Allow Banks to Hold Digital Assets with Capital Requirements

• The European Parliament’s economic and monetary affairs committee has voted on policies for banks holding digital assets such as Bitcoin and Ethereum.
• Part of the new policies is that such banks must hold a certain percentage of capital.
• The BCBS recommended categorizing crypto assets based on consultation papers released in the last three years, and advised banks on how to address possible risks.

The European Parliament’s economic and monetary affairs committee has recently voted on legislation that will allow banks to hold digital assets such as Bitcoin and Ethereum with a certain percentage of capital. This move comes after months of discussion on the subject, with the European Parliament taking into account the recommendations of the Basel Committee on Banking Supervision (BCBS).

The BCBS has issued a series of consultation papers over the past three years, aimed at categorizing crypto assets and addressing possible risks. As part of the new legislation, banks must hold up to 1,250 percent of the amount they hold in crypto assets. This addition to the capital requirements directive and the capital requirements regulation has been welcomed by the Association for Financial Markets in Europe (AFME).

Caroline Liesegang, a spokesperson for the AFME, believes that the Parliament, Commission, and Council should provide a clear definition of what can be considered as crypto assets, so that banks can take the necessary steps to protect their investments. The BCBS recommendations also call for banks to establish proper procedures for managing the risks associated with digital assets.

The European Parliament’s move to allow banks to hold digital assets is seen as a positive step towards the development of a regulated crypto industry. This could also pave the way for more institutional investors to enter the crypto space, providing more liquidity and stability to the market. However, it is important to note that the legislation still needs to be approved by the Council and Commission before it can be adopted.

Overall, the vote by the European Parliament’s economic and monetary affairs committee is a welcome development in the crypto industry. It is a sign that the European Union is taking steps to ensure that digital assets are being managed in a safe and secure manner. As the process goes on, it is expected that the crypto industry will become more regulated, providing more clarity and security to investors.